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

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

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

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

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

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

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

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

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

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

“Boosting sales through innovative products that appeal your customer”

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

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

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

As Citywire’s Jack Gilbert pithily puts it

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

A middle way?

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

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

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



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AgeWage – a mission statement

age wage

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


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


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


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


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

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


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



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


Well Managed

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



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


What we expect to achieve.


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


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

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

age wage simple

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


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Nicky Morgan is right

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

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

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

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

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

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

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

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

Impossible reform

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

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

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

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

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

The AA and LTA are vulnerable for three reasons

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

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

When will see true reform?

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

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


He’s right too!


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Keating on Ralfe, CDC and morality

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

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

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

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

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

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

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

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

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

Longevity pooling?

Maybe, but not spelled out

Can this be achieved more easily?


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Pension hackathon

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

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

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

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

The world moved and the dinosaurs didn’t

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

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

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

Why “legacy” is a dirty word.

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

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

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

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

Speeding up the migration to good

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

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

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

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

Prisoner exchange

Prisoner Exchange should be a win-win


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

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

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


Mr Micawber Something  will turn up

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

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

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

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

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

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

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

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

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

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

agewage vfm

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How GDPR helps us make sense of pensions!


Adrian Boulding has written an excellent article about the new cost and charges disclosures. I will quote only the conclusion and urge you read the rest of it here.

Can we hope to obtain full investment charges data onto a pensions dashboard in a format that is understandable to the majority of savers? No!

Can we obtain disclosure to the point that an adviser can make sense of it all? Maybe.

Being realistic, however, advisers are as time-poor as their clients are demanding. So I am left with one last hope, which is that we can obtain asset management disclosure to the level that specialist adviser firms – the ones that service financial advisers, trustees and IGCs – can make sense of all this data and pass on their findings.

Adrian’s implicit admission is that people will not be able to work out the impact of costs and charges on the outcomes of their savings policies. I disagree.

Let me give you an example;

Supposing I was to look at the value of my pension policy I’ve saved into for the last few years and discover it was worth £100,000. I might be happy, I might be sad , but most likely I’d be mystified. There is no way of knowing if I’ve had a good deal from contributing the money I have.

Let’s suppose that I was given another figure – a theoretical figure – £150,000.  This is the amount I would have had from that pension policy if I hadn’t had to pay the butcher, the baker and the candlestick maker for managing my money.

I don’t think I’d have to be a genius to work out that the cost of my policy was £50,000.

Now let’s suppose that I was allowed to know the amount that was contributed to my policy over the years. Money might have arrived from my personal contributions, from what my employer paid, from HMRC as tax relief and even from the DWP (if I used the policy to contract out of SERPS/S2P. Let’s say my total contributions had been £80,000.

In a very simple analysis of what has happened to my policy, I’ve got back £20,000 more than I put in and the pensions industry has had £50,000. The value of my policy has been £20K and the money I’ve paid to get it has been £50k.

Such an analysis reflects badly on all the parties involved in the running of the policy. Anyone looking at these numbers would be hard pushed to justify the “intermediaries”  between him/her and the money getting 2.5 times the return that he/she did.

If it had been the other way round, and the individual got £50,000 value and the intermediaries got £20,000, then the equation might look right.

The trouble is , that ordinary people are not able to get this simple information in their hands. I think they should. Not only do I think they should be able to get proper information about the total costs they have incurred , but I think they should be told the total amount that has been contributed and the value those contributions have grown to today. What is more, the Government agree.

How GDPR help us

The Data Protection Act 2018 (which incorporates GDPR) gives us all the right to see the data that is held by others on us, and to see it in machine-readable format – that means in a way that a computer can process the information (data) to make sense of it.

What that means is that since May of this year, you and I can get all the data needed to see how much we’ve contributed, what has been taken by intermediaries and what we have left.  We have the right to this information, but not yet the means to make sense of it.

What I am intending to do with AgeWage, my new venture, is to get this information, make sense of it and to present back to people the value they have got for their money so they can make sense of what has happened to their savings since they made them.

Whether that makes AgeWage what Adrian calls “a specialist adviser firm”, I doubt. Whether this makes AgeWage a very valuable venture, I have no doubt. AgeWage will be the first organisation to tell people the value they have got for the money they have spent on pensions. There is a great deal of “value” in that!


agewage vfm

The single number score that tells you how you’ve done.



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

Will a “Transfer Value Comparator” work?


DB transfer activity has begun to stabilise, with far more transfers being quoted and taken every quarter compared with the position before the new freedom and choice flexibilities were introduced by the Government in 2015. Bart Huby LCP Aug 2018

LCP, one of the brightest of pension consultancies estimate the average pension transfer value at £448,000, twice the value of the average house in the UK.

Before the introduction of Pension Freedoms only 10% of CETV quotes they issued were taken up, that figure now stands at 29%.

Last year Barclays Bank’s massive pension scheme reported £4bn taken via individual transfers, they’ve accounted for an expected 20% (nearly £5m) to flow out this year.

Small wonder that LCP had to book a bigger hall to present their “Survey of DB Transfer Comparators”. A year after the Port Talbot scandal broke, transfers are still the big news.

What’s the big deal about Transfer Value Comparators (TVCs)

The FCA hope that transfer activity will not just “stabilise” but improve in quality. It is introducing a way of comparing Cash Equivalent Transfer Values with what would be given up. The joint paper between Royal London and LCP has an illustrationTVC 2

LCP estimate that for someone 10 years away from retirement, the TVC will on average show that someone only gets 57% value from the CETV, this rises to 75% the year before retirement but even then represents a loss of 25% purchasing power in taking the transfer.

The FCA want us to consider this loss as the price we pay for freedoms – or at least for the flexibility that having a big fat cash pot brings – over a wage for life.

Also presenting at the event was Steve Webb, who’d been up all night to get happy (or at least performing on Radio 5 Live). Steve showed a chart which explained what people valued from having a big fat pot and all those things were behavioural not fiscal. People like the inheritability of a pot, they like its flexibility to be spent as the owner chooses and of course they like the idea that it is their money- not an insurer’s or trustees’.

What the FCA are hoping is that people will stop and think how much they are prepared to pay for those heuristics- even 25% of £500,000 is well over £125,000.

This – they hope – is the big deal about TVCs.

Is this the right way of presenting the argument?

Steve Webb pointed out the principal risk of the FCA’s approach

“There is a serious danger- if the advisers think the bar charts are “nonsense on stilts” that they are going to struggle to deliver TVCs to clients”.

Webb pointed out that in the original FCA mock-up he’d been shown, the TVC appeared on page 30 out of 43 –  by which time the former Pension Minister had given up the will to live. He went on to say that recent versions have seen the TVC move up to page 5, but it clearly is not being treated as “headline news”.

Webb pointed out that for people who are trying to get rid of a guaranteed wage for life , presenting them with the cost of repurchasing what they have given up is hardly the most intuitive of advisory tactics.

For Steve Webb and Royal London, The TVC arrives to some scepticism, with which I have some sympathy.

Why can’t you just repurchase what you’ve given up at the same price?

The FCA have chosen to set the TVC as the full cost of buying back the pension lost, it could be put the other way round and express the amount of pension lost if the CETV were used to buy an immediate annuity.

The reason that TVCs repurchase so much less than the pensions given up is threefold

  1. Individual annuities do not enjoy the economies of scale achieved by group schemes paying pensioners from a payroll. They also involve insurance companies taking a margin. This makes them inherently more expensive to provide than scheme pensions and hence they purchase pension pound for pound than the pension they replaced
  2. The time between a pension coming into force and the CETV being taken is investable time. The TVC is calculated using a risk-free rate of return whereas the CETV is discounted against the investment return of scheme assets (on a best estimates basis. The TVC does not enjoy the investment return the Scheme Pension gets between its calculation and normal retirement.
  3. The scheme pension is itself invested and is not invested in risk-free assets, you have to put aside less to pay a scheme pension than an annuity because of the greater freedom trustees have than insurers.

Add together the greater operational efficiency, the opportunity cost of purchasing an annuity early and the long term investment disadvantage that annuities suffer against scheme pensions, you get to why TVCs are so much lower than the scheme pensions they are compared with.

Financial economists like John Ralfe will look at those three points and will say “bollocks”, but them is the rules.

We expect economies of scale, we believe in the equity risk premium.

The Transfer Value lottery.

Much of LCP’s presentation was spent explaining something I’ve touched on this blog before. The biggest factor impacting the CETV is the discount rate being used to create it.

Since the discount rate is a function of the investment strategy and the investment strategy is decided upon by the Trustees, CETVs are effectively a lottery – as far as the member is concerned.


The chart above shows how someone who’s CETV value is calculated using a discount rate generated by the scheme being invested in 80% risk-free assets will get the blue circle’d 70% TVC while the poor wretch with a scheme invested only 20% in risk-free assets will only get a 50% TVC.

The conclusion is that not all transfer values are calculated the same , but the output of the CETV – a cash amount paid into a personal pension, differs only by the size od the payment! That is a total lottery as far as the member’s concerned.

For Trustees, the equation is simple. If you think people will take any notice of TVCs, the more aggressive your investment strategy, the less likely you are to lose prospective pensioners through CETVs. Conversely, if the intention is to get rid of your scheme, the faster you “de-risk” from equities to gilts” the more transfers you can expect.

Ongoing questions for people who transfer.

Having had 24 hours to cogitate, I agree with LCP’s four questions

  • What is the Transfer Value Comparator?
  • How do transfer values differ between different schemes?
  • How does the scheme’s investment strategy impact the TVC?
  • How might TVC illustrations impact the number of members transferring?

No adviser – advising on a transfer, should ignore these questions. If I was the FCA and I wanted to know that the person who had paid for transfer advice, had understood that advice, I’d be focussing on these questions which might be rephrased for ordinary people

  1. What did you make of the Transfer Value Comparator?
  2. Did you understand how your CETV had been calculated – do you think you did well?
  3. Did you understand what your former pension scheme was investing in and how it affected your CETV
  4. Did the TVC influence your decision to transfer – and if it did – how?

Are we asking these questions too late?

My worry, and it’s clearly a worry in LCP-land too, is that in 10 years time, the vast majority of those in DB schemes will have reached pension age. By then they’ll have either taken a transfer or it will be too late to do so.

While it’s good that the FCA are still testing the water on what works, it’s bad that in the meantime there’s a risk that the TVC test won’t work and that we’ll be revisiting this subject in three years time after another Port Talbot.

The FCA could have taken a much more draconian step to reduce transfer activity and banned contingent charging. On this Royal London and LCP do not see eye to eye. I don’t see eye to eye with Steve Webb on this either.

Royal London’s position is that advisers can be trusted and mine is that the only advisers who can be trusted are those who work on an upfront fee – paid whether the transfer is taken or not.

I know that some advisers who I do trust (such as Al Rush) work on contingent charging but I cannot make the rule fit his exceptional probity.

My conclusion with regards TVCs is that they will be effective as advisers want them to be and – so long as we have advisers working on a “no CETV no fee” basis, they won’t make much difference.

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Payroll are tomorrow’s Pension Experts!


I spoke at the CIPP Conference at the National Exhibition Centre at what payroll can do to help staff understand pensions and in particular – the pension freedoms.

Here are my slides

I think there are three things that hold payroll back from becoming pension experts.

  1. Pension experts who’d like to keep payroll in their box
  2. Payroll experts who lack the confidence to say it as they see it
  3. A general fear about talking about pensions without being a regulated financial advisor.

All three reasons need to be challenged.

  1. Pension Experts are few and far between and for the vast majority of the million plus employers in the UK there is no “pension expert” in-house or available for hire.Where there are pension experts, then they should be talking to and learning from payroll – payroll people should not be excluded from pension education.
  2. Payroll experts are highly qualified analysts trained in the minutia of tax and auto-enrolment compliance, they are trusted to get things right, few others in an organisation have the trust of everyone. Payroll experts are ideally suited to deliver the tough messages of pensions – they say things as they see them and they say things right.
  3. Though some pensions fall under the FCA’s remit, most don’t and even the ones that do (GPPs) can be explained in general terms. As long as people stick to giving information rather than opinion , they will stay on the right side of the guidance/advice line.

Step forward payroll!

Whether you run a bureau or lead an in-house payroll team, you should be pressing to become authoritative on workplace pensions.

Even if you have a pension team in-house , payroll people need to be stepping up to the plate and offering their expertise on tax, national insurance, salary sacrifice and all the minutia of auto-enrolment compliance.

But in most cases, it’s not just the employer who needs help, it’s staff. The presentation I gave yesterday can be downloaded from slide share by simply pressing on it  from this blog. First Actuarial aren’t precious about the IP in the presentation, if you want to present our talk-through on tax and NI, please do! If you want to use our Muppetometre, please do.

We are delighted to help employers who need our help. If you would like a chat about how we can do this (and when the clock starts ticking!) , just drop me a line at





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

Will “DC deficits” become a thing of the past?

News of HMRC’s “change of position” with regards the “net-pay- anomaly” is welcome, and long overdue. It came in the form of a letter sent in response to a request from respected journalist Jo Cumbo of the FT.

It has been greeted with little enthusiasm by the majority of the pensions industry. This in sharp contrast to NOW pensions, who got the momentum together for the joint letter.

Commenting on reports in today’s Financial Times that HM Treasury will tackle any differences in how pensions tax relief is provided, Adrian Boulding Director of Policy at NOW: Pensions said: “We’re pleased to see the government making a firm commitment to resolving the anomaly in net pay schemes. This is an important issue which has been swept under the carpet for too long. We look forward to working with HM Treasury and HMRC to make sure all savers are treated equally.”

Here is the only public comment I can find from a UK pension consultant.

It is very good that Hymans published that research back in April, but it only tells half the story, the vast majority who are overpaying on their workplace pension contributions by up to 25% are not in multi-employer master trusts, but in single employer sponsored occupational schemes.

The deficits between what a low-earner enrolled into an employer’s occupational pension scheme is every bit as real – in terms of outcome – as the deficits of which so much is made, in our DB plans. Both will result in a material loss for members. Deficits are very real, very numerous and they reduce DC cash balances just as the PPF reduces DB pensions.

Since the low paid can now but auto-enrolled into DB schemes (including Government schemes), it is likely that a significant proportion of those losing out because of the impasse, are consulted on by Hymans Robertson, WTW, Mercer, Aon and my own First Actuarial. For DB members, it is a question of over-payment of contributions not the reduction of benefits, but the impact amounts to the same thing. The low-paid are being ripped off and the pensions industry hasn’t seemed to be giving a monkeys.

This is why this is an industry problem and not just one particular to master-trusts and why the PLSA put its name to the letter which has prompted this change of position.

News of this “change of position” came on the same day we heard that the Competition and Markets Authority are to launch a Market Study into the role of auditors in occupational pension schemes. Professional Pensions reported yesterday

Defective” company audits could mean millions of savers in pensions funds are “losing out”, says the Competition and Markets Authority (CMA) as it launches a probe of the audit sector.

I hope that the report will include the issues highlighted here and elsewhere on the failures of auditors to report on DC Deficits.

Payroll welcomes the news.

I was (and will be again today), speaking at the CIPP annual conference in Birmingham. The reaction to the news that everyone contributing to a workplace pension would be given the promised incentive, was greeted with enthusiasm. This from people who have day to day contact with the people affected, people who understand the risk to their employers (or for bureaux- customers) of being a party to a scandalous situation.

Speaking to the CIPP’s Helen Hargreaves (a co-signatory on the letter) , the reported change in position has clearly been seen as a win for common sense and natural justice.

We now need to ensure that the implementation of any change is fair to the low-paid. This is what I hope the signatories to the letter will urge the Treasury to do.

With understandable reservation…

The note of caution sounded by some related to the possibility that the change of position was part of some wider conspiracy against low-earners. This from one person who commented to me by email

Let’s hope their solution isn’t to stop tax relief for non taxpayers. Wouldn’t put this past HMRC.

This view, that HMRC are preparing to dumb down pensions generally , focusses for many, on the possibility of the Chancellor announcing in the budget a move to flat rate tax relief on personal contributions.

Though nothing is impossible, it is difficult to see how this would work. Most employers now have the capacity to disguise employee contributions as employer contributions through the use of salary sacrifice. Working out what has been sacrificed and extracting cash from the imputed amount will require a “scheme pays” type mechanism.

For such a system to be introduced will require extensive and expensive changes in processes at both HMRC and from pension and payroll providers. I do not think that such a disruptive move would carry political support from a business friendly conservative party, nor social support from a country supposedly engaged in helping out those “just getting by”.

Are pension experts embarrassed?

So I am minded to ignore the Jeremiahs and take the silence of most pension experts as the embarrassment of knowing they have done little or nothing about this problem for the many years that it has been known.

I suspect that the silence among consultants on the issue has been because they not only advise on the design and administration of the net-pay schemes that are at the heart of the problem, but they administer them too.

If the solution to the problem is “retrospective”, then the bill for restitution will be a disputed bill. Will it fall to the administrators, the advisors or rest with the trustees?  In a DC trust there is no contingency for restitution, the costs of working out fair shares and allocating monies in line with the losses incurred would be substantial.

It is more likely that the revenue will draw a line in the sand and expect any new practice to be forward looking. This will still put a great deal of strain on the software designers on whose record keeping systems most of the net-pay schemes sit, the administrators who will need to change processes, payroll who will have a job to do ensuring that any tax anomalies arising from the changes are recorded and of course employers and trustees who will have to explain all this to bemused low-earners.

Is this just too awkward?

It’s all very awkward isn’t it? It’s not the kind of dirty linen that the occupational pensions industry wants to be talked about, especially as this not a problem that impacts contract-based plans run by insurers or master trusts operating on relief at source (NEST and People’s Pension for instance).

It’s a problem that has run on too long and that needed to be addressed. The twin spurs pricking the sides of the Treasury’s intent are undoubtedly the problems surrounding Scottish Income Tax and the imminence of the Budget.

My personal guess is that the “Net-Pay- Anomaly” offers an embattled Chancellor an opportunity to give to the poor some of what he’s taking from the rich (by way of reduction of pension allowances).

If this is what Phillip Hammond does, I will not be against it. The pension taxation system is so biased against low-earners in favour of those with large pensions and pension pots, that any form of redistribution is to be welcomed.

Phillip Hammond does not need to feel awkward about being seen to solve the net-pay problem, but I’ll be making him feel very awkward indeed, if after the letter  sent to Jo Cumbo at the Financial Times, the Budget remains silent on this issue.


Better late than never

Posted in advice gap, annuity, auto-enrolment, pension playpen, pensions | Tagged , , , , , , | 2 Comments

The conflicts of interest facing pension trustees



Robin Powell of the Evidenced Based Investor, interviewed me this week. You can find the original interview here, Robin’s work is important, I hope a few readers will come to his seminar- advertised at the bottom of this piece.

One of the most exciting things about helping to campaign for greater transparency in UK asset management over the past few years has been the chance to be part of a community of highly motivated and principled people.

The likes of Chris Sier, Andy Agathangelou, Con Keating and Gina Miller have devoted huge amounts of time, and most of it totally free of charge, to improving outcomes for consumers.

Very much part of that group is the pensions consultant HENRY TAPPER. Henry is a supporter of the Transparency Task Force, of the growth in workplace pension take-up through auto-enrolment, and of the move towards collective defined contribution (or CDC) pension schemes. His blog, Pension PlayPen, is a go-to resource for everyone involved in institutional investing in Britain.

In this interview Henry discusses the current state of institutional investing and the conflicts of interest that exist within investment consultancy. He also explains why trustees have been so slow to adopt a more data-driven, evidence-based approach.


Henry Tapper, how did Pension PlayPen come about and what was your vision for it?

The Pension PlayPen was conceived as a place for pension professionals to congregate and have fun. It was at the time when the Bribery Act was coming in and many of my friends thought the days of taking corporate bribes were over. We ganged up and did our own entertainment out of our own pocket without having to trouble the corporate gift register!

The PlayPen has a big following and is now an important part of the UK pensions landscape. What’s the secret?

I’m surprised that you think that it is important — that’s very flattering! We’re still going after 11 years and Pension PlayPen has evolved into a website for helping employers choose a workplace pension, a 10,000-strong LinkedIn group and a blog with over one million reads. I think it’s about consistency, sticking to your guns and having a clear vision of what’s right!

I notice you aren’t afraid to speak your mind!

I live in a constant funk that I’ll be taken out! Seriously, I’m like rhubarb; the more you beat me up, the better I feel!

Something else we have in common is our support for the Transparency Task Force. What do you feel the TTF has achieved?

A lot of people laughed at Andy Agathangelou when he started out and he’s proved everyone wrong. Andy brings people together because he’s so positive. He’s consistent, persistent and unremittingly optimistic. That’s a pretty amazing combination! TTF is now a factor in corporate decision-making and that’s the mark of Andy’s achievement.

Human nature being what it is, though, we’re never going to see total transparency in investing, are we?

It’s back to TTF. If those who have the power to change things feel encouraged to do so, then they will. Right now, Andy’s creating the conditions for change and it’s now up to the awkward squad — me, Chris Sier, Gina and Alan Miller, yourself and others — to drive home the advantage.

As you know, I’m an advocate of low-cost index funds. Why do you think trustees still tend to prefer actively managed investments?

We need someone to blame. Choosing an active manager who performs reflects well on trustees, and if the manager fails, it’s easy to blame the manager for the trouble you’re in.

Does the continuing reliance on hedge funds surprise you?

Our governance structures are slow moving, we were slow adopters of hedge funds and we’re late to abandon them.

As you know, private equity seems to be flavour of the month, and yet PE has a big transparency issue, doesn’t it?

The Railways Pension Scheme lifted the lid on the costs incurred by private equity managers. Any fiduciary allocating to this asset class now has to explain why they’re investing in such an opaque form of investment. There’s a lot to be said for private equity, but transparent it is not.

One problem I’ve noticed is that trustee training is often provided by product manufacturers. That’s a clear conflict of interest, isn’t it?

There’s an industry in trustee training and as the question points out, it creates an agenda which points the trustee at investing in products which generate a margin reckoned to be among the highest in any industry in the UK.

The FCA is currently looking into competition in the investment consultancy sector. What’s your view on that?

Investment consultants are important to the proper functioning of occupational pensions. But they have put themselves into a conflict where they find themselves marking their own homework. The Competition & Markets Authority review must help them resolve that conflict by ensuring they are genuinely independent of the products they advise on.

Finally tell me about your latest project, AgeWage?

AgeWage is my new venture to help ordinary people find out how their pension pots have built up and whether they’ve had value for money. I’m very excited by the opportunities this gives ordinary people who struggle to understand what’s happened to their pension savings  — or how to spend them!

Thank you for your time, Henry. And keep up the great work you do on behalf of investors.

Henry Tapper is one of the delegates at our free educational seminar, Evidence-Based Investing for Trustees, in London on Wednesday 17th October, which we’re holding in conjunction with the Cheltenham-based financial planning firm RockWealth.

As well as me, the speakers are Lars Kroijer, the former hedge fund manager turned indexing advocate, and David Jones, Head of Financial Adviser Services (EMEA) at Dimensional.

The seminar runs from 0830 to 1030 at the Amba Hotel, Charing Cross, WC2N 5HX. There are still places left. If you’d like to attend, simply email Sarah Horrocks at

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

34 firms under investigation by FCA for non-disclosure of investment charges



true and fair

Alan and Gina Miller’s True and Fair Campaign

The Times are running this story as a result of a tip-off by professional charge-busters and founding members of the awkward squad SCM Direct. If you don’t know what SCM Direct is, that’s because you aren’t one of their clients, SCM Direct is the wealth management business of Alan Miller (of New Star fame) and Gina Miller (famous for just about everything but especially for “Remaining”).

Here’s the Thunderer with the evidence presented it by the Millers

The rules were first set out by the EU in April 2014, so the industry has had years to prepare, said Miller.

“It’s time for the chief executive of the FCA, Andrew Bailey, to demonstrate that he is willing to be the industry enforcer rather than the industry lapdog.”

In one case, a (Times) Money reader with lasting power of attorney over his 98-year-old father’s affairs asked the wealth manager Canaccord Genuity for the charges on his parent’s £700,000 portfolio.

In an email, an investment director at the firm said its management fee was 1.25% and a flat £30 commission per transaction would also apply. The reader asked SCM Direct to check. It emerged that the 1.25% did not include VAT, underlying fund charges or transaction costs. The overall charge was closer to 2.75%, meaning an additional £10,500 in charges were not initially highlighted.

Canaccord agreed the full charge was nearer 2.75%, but said it was asked specifically for only its own management fee and commission charges and intended to disclose the full cost to the client “ahead of an expected face-to-face meeting”.

David Esfandi, chief executive of Canaccord, said: “If there are any suggestions we have been less than transparent with our fees, we would strongly refute that.”

Research conducted by SCM Direct in May shows the Investec Click & Invest website presented its charges as ranging from 0.35% to 0.65%, depending on sums invested, and underlying fund charges averaging 0.6% (0.75% today). However, this did not include transaction costs, which add a further 30% to the fund cost.

Investec said: “We should have clearly shown the transaction fee within the average underlying fund charges. We have amended our website and apologise if this has caused confusion.”

SCM Direct also highlighted potential breaches by Coutts, Tilney Bestinvest and Wealthsimple.

Coutts said: “We already include details of the platform fees and the main fund charge at several points in the customer journey. In response to Mifid II, we have added the funds’ transaction costs to our Fee Tariff Document, which is readily available to clients. Next month, we are launching an integrated solution, including a personalised digital calculator, to further improve transparency.”

Tilney Bestinvest said wealth managers relied on fund management groups to provide accurate information. “We are currently in advanced dialogue with data vendors to enable us to secure this data and satisfy ourselves that their coverage is comprehensive.”

Toby Triebel, Wealthsimple’s chief executive Europe, said: “Both our management fee — 0.7% — and underlying portfolio charge are visible on our website, in addition to being highlighted through our help centre and magazine.”

Utter Hogwash

Even I , a seasoned watcher of corporate bull, was startled to read such utter hogwash from seemingly reputable organisations.

If you can’t t understand your charges, that is not “true and fair”. Being “in an advanced state” of complying with something you’ve known was coming for 14 years and has been law for nearly a year now is NOT GOOD ENOUGH.

The Miller’s point is a good one. If the FCA are not going to enforce its rules, it shouldn’t make them and we should live in the Wild West of fund management as practiced in numerous jurisdictions round the world (read Angie Brooks for details).

It’s not good enough to stand idly by and allow this bad practice to continue and I’m 100% behind Alan and Gina’s “True and Fair” campaign. Read about it here.

The proof of the (investment) pudding is in the spending.

You might think this article is leaning a bit too much on the Millers, after all they’ve made a fortune from investment management. I don’t doubt that they’ll continue to make a fortune by running a “clean shop”. The point that the Miller’s are making by running a successful business on “true and fair” lines is that you don’t have to be uncommercial to be honest.

I am aiming to be as successful as the Millers by setting up AgeWage to tell people “truly and fairly” how their lifetime savings products have actually done relative to the money they have paid to the financial services industry.  Value for Money is something we think is inherent in the simple equation “money-in, money out”. There can be no excuses in the final reckoning; when it comes to saving the proof of the pudding is in the spending.

We now have the tools

Working out “ongoing charges figures” (OCFs) is good and it’s what should come out of the legal requirements to disclose from MIFID II and PRIIPS. But OCFs and other percentage based measures only play to the people who understand percentages and the way compound interest works.

More important to people when they are judging things are measures that tell them what value they are getting for your money. Which is why I want to turn performance and charges into a single score that relates – not to some abstract notion – but to your understanding of what’s gone on.

Since the Data Protect Act 2018 and (to a lesser extent GDPR), we have all been able to get to the data about ourselves necessary to understand the value and the money we’ve got from our savings. AgeWage is simply a way for people to have this information brought together to tell them how their savings have done and how they are likely to do in the future.agewage vfm

In both intent and practice , AgeWage is born out of True and Fair and this blog acknowledges Alan and Gina Miller, Chris Sier, Andy Agethangelou and the other members of the awkward squad, who are gradually wresting back control from those who intermediate between us and our investments.

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

The net-pay scandal gathers momentum


Key “net pay” (or variations on the phrase) into the keyword search on this blog and you will find over 30 articles going back to early 2015.

It was Kate Upcraft who first put me on to the problem which emerged as the auto-enrolment entry band did not align with the entry level for income tax. She explained that not just the relatively few people auto-enrolled into net-pay occupational schemes then, but the huge number auto-enrolling since, could lose out on the Government promise of 4+3+1 contribution structure (with the 1 being a percentage of pensionable payroll, which earned a Government incentive. To put it bluntly, net pay schemes put 12.5% of your contributions at risk.

Of course the risk isn’t very real for the higher paid who are unlikely to get out of bed for less than £1000 pm; the risk falls on the lowest paid who often are the least advantaged in society.

I argue that those people who don’t get the ‘1’ are in contribution deficit and I’ve told the Pensions Regulator that if they are prepared to

block employers with DB plans from completing corporate transactions until DB deficits are plugged, they should do the same with DC. Whitbread’s sale of Costa to Coca-Cola is a case in point. We do not know how many Costa employers are missing part of their pension entitlement, but – knowing the nature of work at Costa, we can imagine it’s quite a few. I want an audit of DC contribution shortfalls to be carried out now and for the restitution of promised incentives to be completed before the deal is done.

This is why I am proud to be one of the signatories on the letter to the Chancellor, delivered by NOW Pensions.

Progress so far.

The Daily Mail’s This is Money has run its piece which is very comprehensive. You want a link?  Here it is .

The Daily Express has also run a good piece. Here it is

And there are various articles in the trade and political press; here they are

FT Adviser – Altmann and Webb demand tax loophole is closed

Pension Age – Industry heavyweights urge Chancellor to fix the net pay anomaly

Actuarial Post – Now Pensions signs letter to Chancellor on net pay anomaly

Professional Pensions – Govt urged to take action on net pay anomaly as experts sign letter to chancellor – Campaigners press government for action on pension tax relief

Financial Reporter – Campaigners call for government action on pension tax relief losses

CIPP – Campaigners press government for action on pension tax relief

Money Age – NOW: Pensions co-signs letter to Chancellor to prevent AE being ‘undermined’ – NOW writes to the Chancellor on behalf of the pension unloved.

Well done the few – what of the many?

It’s all very well for the pensions industry to squeal about rich people’s problems, (Annual Allowance, Lifetime Allowance, IHT thresholds), but it’s incumbent on all of us to come to the help of those who don’t have financial advisers and aren’t valuable to pension providers.

I’m really pleased to see those who put their signatures to the NOW letter. They deserve applause.

Caroline Abrahams, Charity Director, Age UK

Baroness Ros Altmann, Chair, pensionsync

Troy Clutterbuck, CEO, NOW: Pensions

David Dalton-Brown, Director General, Tax Incentivised Savings Association (TISA)

Anne Fairpo, Chair, Low Incomes Tax Reform Group of the Chartered Institute of Taxation

Helen Hargreaves, Associate Director of Policy, Chartered Institute of Payroll Professionals (CIPP)

Paul Nowak, Deputy General Secretary, Trades Union Congress (TUC)

Nigel Peaple, Director of Policy and Research, Pensions and Lifetime Savings Association (PLSA)

Henry Tapper, First Actuarial and Pension PlayPen

Steve Webb, Director of Policy, Royal London

But where is the ABI on this?

The ABI can generally sit smugly on the right side of the debate, because the GPPs which form the bulk of their corporate pension business operates on a relief at source basis. Though some insurers run master-trusts on a net-pay basis, the ABI declined to sign the letter as they could not mobilise their membership behind it.

What possible detriment could there be to the reputations of insurers , in calling for the low-paid to be given a break? I am saddened that the ABI are not signatories, I hope that they will put their weight behind the campaign within the next three weeks.

All eyes on the budget

In three weeks, Philip Hammond will deliver the 2018 Budget. He speaks for a Government run by Theresa May who pledged, on appointment to help those just getting by.

If Theresa May is reading the Express, the Mail and the many other publications I hope will follow, she may want to nudge her Chancellor a little further. For the untold number of us Brits who participate in auto-enrolment and don’t get the break they’ve been promised are precisely the people who struggle to “just get by”.

Esther McVey and Guy Opperman should be rattling the Treasury Gates. Opperman in particular- he asked to have the title of Minister of Pensions and Financial Inclusion. If you believe in financial inclusion and are happy to take the credit for auto-enrolment , why are you excluding the newly “included” from what you promised them?

Posted in advice gap, pensions | 4 Comments

Play “Stick or twist” in the workplace pension lottery!


Stick or twist 1If you changed jobs, would you prefer to stick with your current workplace pension or join your new employer’s scheme (leaving a little pot behind you)?

It’s a tough choice, and the more you think about it, the tougher it becomes. For example, some workplace pensions – the ones that have a fixed monthly charge – are particularly tough on small pots, others – which rely on an annual management charge – are easier to leave behind. Pensions are so complicated, isn’t it easiest not to bother? After all, that’s why auto-enrolment has been a success, people didn’t bother to consider opting out!

But what’s good a small pot to you in retirement, you’ll probably want to “aggregate” it into a bigger pot at some time in the future, so why give yourself the problem? Wouldn’t it be easier to take the pension you started with to each of your future employers and hope that you got lucky first-time round?

I know there are people who say “don’t put all your eggs in one basket” but it’s not much fun having lots of tiny baskets when you are managing your retirement finances! The value of diversifying across lots of workplace pensions is at best unproven!

This is why the Pensions Minister, Guy Opperman is consulting with pension providers about operating a clearing system for auto-enrolment, just as happens in Australia. How this idea might work would be for payroll to pay not to a provider, but to a clearing house, which directed the payment to a provider selected by the member.

The member decision could be simplified into the binary choice I gave you at the top of the article and a default could be used “if you don’t choose to use your current pension, you’ll be auto-enrolled into the new plan”. This is rather easier than defaulting into the “current plan” as that assumes that the current plan is still available to the new member and it mightn’t be able to receive contributions from a former employee.stick or twist two

There are then two obstacles to offering the choice to members, the first is the technology, (the extra cost of clearing) and the second is the nagging doubt it puts in people’s minds -“have I made the right choice?”

Of the two, the second is the hardest. When Stakeholder Pensions were introduced back in 2001, the idea was that because there were no exit penalties, people would be able to take one stakeholder pension to another as easily as we exchange pound notes for loaves of bread. It didn’t turn out to be the case as regulations were introduced requiring people to take advice before moving money.

The reason for advice was it was thought that not all Stakeholder Pensions were created equal and that people could do financial “self-harm” if an adviser was not involved. In practice, advisers learned that they could take hansom commissions in helping people switch money, a practice that was banned from 2013. We now have the awkward situation where people cannot move their own money from pot to pot, but advisers can’t be rewarded by commission for doing so. As people are reluctant to pay advisers fees, the pots tend to stay where they are and the result’s the DWP estimate there will be 50m abandoned pots by 2050.

These pots are expensive for providers to administer. They not only have to keep a record, but ultimately, they have to manage a claim on the pot – which wipes the lifetime value of pot management to the provider. One providers told me he wanted to manage an army of well-drilled soldiers, not a “prisoner of war camp”. The analogy is apt, small pots are captives like prisoners, another provider talked to me of bulking the transfer of small pots as “prisoner exchange”.

In order for us to move on from the problems that are building up for providers and consumers, we need to find a way for small pots to be transferred without detriment to member. This means either reducing the cost of advice to zero or going back to the original premise, that once you’ve sufficiently regulated stakeholder or workplace pensions, moving from one to another doesn’t require advice at all.

In the long term, we need a system that allows us to easily “twist” and move our pots from one provider to another, or “stick” with one workplace provider for our savings careers. Tackling the twin obstacles of technology and advice is now high on the Government’s agenda.

stick or twist 3

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Why would management fees be any cheaper for #cdc than DC?

newton blake

Blake’s view of Isaac Newton (see final paragraph)

It’s a question posed by John Ralfe- to me – on twitter. It’s a serious question and one that Jeremy Cooper, doyen of the Australian Super system is clearly interested in too.

The question cannot be simply answered with reference to academic theory. Having just read a short and very understandable academic paper on the advantages of tontines over life annuities, I am in no mood for further academic wrangling. If all CDC was about was rearranging deckchairs, then I’d be looking to the lifeboat!

What is my answer?

If the answer doesn’t lie in actuarial science or in financial economics, perhaps we should look at what creates the inefficiencies’ in DC. What cannot be denied is that people pay a vast range of fees for having their DC pot managed. Last night I was with Quietroom , watching vox-pops of people being shown the fees they were paying, most of the people were not just unaware of these fees, they were unaware that there were charges on their DC plans in the first place.

The comparator two people used was with their bank

“I might as well take my money out and put it in the bank where I know what I’m getting and I won’t get charged”

One answer to the question is “governance”, individual DC plans, especially when they move away from employer funded to individual drawdown, have very little governance. It is easy for an advisor or a non-advised drawdown provider, to charge what they like. There is no-one to stop them.

Another answer is in the nature of a “trust”. If we consider the not for profit principle that has been at the heart of collective occupational pensions for the past sixty years, you can see it as the continuation of a benevolent paternalism that has persisted much longer. It is the paternalism of Joseph Chamberlain and the 19th century industrialists who built Bourneville and Port Sunlight. It is a cultural aspect of our British way of life, it is what is expected of our bosses.

This expectation that bosses will set up trusts for the welfare of their staff – run on a not-for-profit basis, has not gone away. It is implicit in relations between unions and employers and accepted by both sides. These collective arrangements are the inspiration for multi-employer schemes, the Pensions Trust, the Social Housing Pension Scheme, B&CE’s holiday plan – the People’s pension. The concept of the state as a super-employer lives on in the national acceptance of NEST as a good thing.

The alternative to the brutality of the market, is the protection of the trust.

So – for most people – the collective solution is a natural solution. It is part of our culture in a way that the American 401k system isn’t. The Australian alternative – where the state is all powerful and decrees the way Super is managed, is no alternative to the British system of “trust”. The fact that we trust each other and our employers and the Government to provide for us collectively, is of major advantage to the British pension system.

That – since the mania for personal pensions – we have done all we can to destroy that trust in favour of financial empowerment of the individual – has not made that trust go away. The system of collective pensions is still in place, it is simply looking for an upgrade.

Five practical advantages of the collective approach to DC

These five advantages are not specific to CDC, they are advantages that spring from the collective mind set talked of above and can be implemented through trustees because of trust. Those who  don’t believe that trust exists will poo-poo these arguments, I would ask for them to show of proof that trust does not exist.

  1. The investment management agreements that can be negotiated by organisations representing billions, reduce the margins of fund managers and return that value to consumers through the not for profit mechanism – economies of scale in the purchasing of investment services
  2. The recording and documentation of records for a large group can be managed by repeatable processes (smart ledgers) which use straight through technology. The administration of collective pensions is cheaper than the administration of individual plans.
  3. The payment of pensions under a collective arrangement is considerably cheaper when everyone is being paid in the same way (a wage for life). The substitution of a rules based  pensioner payroll for an individually driven drawdown plan, cuts down on payment costs.
  4. The communication of what is going on , is – in a collective DC plan – a one to many job, rather than an agonisingly difficult process of explaining on an individual basis. The advisory costs of CDC are minimal, the costs of advising on individual plans, especially in drawdown, makes drawdown unfeasible.
  5. Finally, CDC – by dint of it being run on a not-for-profit basis , is feeding less mouths. The cost of intermediation of a one to many scheme is intrinsically less than a great number of individual plans.

Can this be proved?

I think it can and will be proved. It cannot be proved in practice till we have CDC schemes and my hypothesis that we can tap into the great goodwill of trust to make CDC happen and keep it going – is just that.

Academics will point to risks in this approach and in as much as I am relying for my arguments on concepts like goodwill, I will be deemed to be airy-fairy by some financial economists.

But if we left the world to Newton, we would have no poetry, if we left the world to the financial economists, we would have no pensions!


Good luck to those debating CDC at the Corporate Adviser Summit today.

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Schools staring into a pension “abyss”



Contrary to indications that the Teachers’ Pension Scheme (TPS) employer contributions for 2019-20 would be set at 19.1%, schools have now been told  that the figure from September 2019 will be 23.6%.

The Teachers Pension Scheme, along with all other unfunded public sector schemes, is required to complete a valuation every four years. The valuation has two main purposes: to assess the scheme’s assets and liabilities – the cost of providing scheme benefits in the long-term; and to recalculate the employer cost cap to determine whether it remains within the parameters set out in 2015. The outcome of this valuation is the need to increase employer contribution rates by 4.5%. This figure is well ahead of any formal or informal prediction heard in the last 6 months.

This increase could  have a profound and damaging effect on the finances of schools and will threaten the viability of some as the cost of the increased contributions will have to be absorbed within the school’s financial plan. Schools were given no indication of the magnitude of the new contribution rates which came “out of the blue”.

Further details are outlined below. You will see that maintained schools will receive funding support in 2019-20; independent schools will not.

I’m indebted to the local government association for this information

Teacher Pension Employer Contribution Increase

 HM Treasury recently published draft directions to be used in the valuation of public service pension schemes. The Government Actuary’s Department has now completed their calculations to provide indicative results of the 2016 valuation of the Teachers’ Pension Scheme (TPS) to the Department for Education (DfE), the key results are as follows:

  • Implementation of the change to the employer contribution rate will be 1 September 2019 (rather than 1 April 2019) due to the delay in this announcement.

  • The estimated employer contribution rate will be 23.6 per cent, for the period 1 September 2019 until 31 March 2023.

  • The biggest impact on the employer contribution rate has been the change to the SCAPE discount rate that is used to assess the current cost of future benefit payments; the SCAPE rate will change from CPI + 2.8 per cent to CPI + 2.4 per cent from April 2019.

  • There will be funding from the DfE for the financial year 2019/20 to help maintained schools and academies meet the additional costs resulting from the scheme valuation, a consultation process will take place to determine final funding arrangements. Funding for 2020/21 onwards will be discussed as part of the next Spending Review round.

  • The SCAPE discount rate sits outside the employer cost cap process that was introduced for the 2015 career average TPS as this is a financial assumption. The indicative result also shows that the cost cap has been breached due to the value of member benefits having fallen. This is due to assumptions about earnings (pay increases lower than expected) and reduction in life expectancy. Discussion will take place with the TPS Scheme Advisory Board to recommend changes to the scheme design for career average section members of the TPS to align member costs to the cost cap.

Does anyone know what this will really mean?

The Financial times reports that the Treasury said the increase to 23 per cent was in the right ballpark, but not yet a final figure, and that it reflected lower long-term forecasts for the economy, which will weaken the finances of unfunded pensions in future.

The Treasury has pledged to provide the Department for Education with sufficient compensation for 2019-20 for state schools, further education colleges and independent special schools, but only to “take the change into account” in its 2019 spending review for later years.

Unions are worried, however, that the change in the contribution rate will act as a disguised spending cut after 2020.

Speaking to the Financial Times,  Kate Atkinson, a specialist adviser on pensions to the National Association of Head Teachers, said the union was “extremely concerned” about the long-term impact of the changes on school budgets.

Ms Atkinson said it was “all well and good” that the DfE had promised the anticipated increase in contributions would be “funded” for the 2019-20 financial year, although she pointed out it was unclear what the department meant by the terminology.

“It’s not entirely clear how they’ll provide the funding- . Will it be on the exact cost that each school is facing, or will it be on a pro-rata basis that will end up with some winners and some losers?”

The association was still more concerned about the position after the first year of the increases. “After that,” Ms Atkinson said, “it’s staring into the abyss.”

An unwinding of a hidden cross subsidy- or something else?

What is most worrying about GAD’s valuation is that it implies that the economy is unlikely in future to be able to support current spending plans. The NHS is absorbing its imputed increase in pension costs under the new NHS spending plans, but the relief for teachers is non-existent (private sector) and looks very temporary for the state sector.

With increases in life expectancy falling and public sector wages pretty well static since the start of austerity, we would have expected unfunded pensions to have become more rather than less affordable.

Has the true cost of our public sector pensions been disguised all these years, with the public picking up the balance of costs not collected from schools and teachers?

Or is this nothing more than a stealth tax, where the Government are over-charging for pensions to replenish its depleted coffers.

Will this precipitate calls to scrap defined benefit pensions for the public sector, as called for recently by Michael Johnson?

Those familiar with the USS JEP report – will know all about that trick.


Since this article was published, the Government has published this useful guide to SCAPE and why they feel benefits will have to rise ( justifying increased employer charges). I am unconvinced that this isn’t a civil servants way of giving him/herself a rise in reward at the tax-payer’s expense.


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Should Government play “fantasy pensions”?


fantasy pensions.jpg

What should we make of reports in the Daily Telegraph that our Pensions Minister, Guy Opperman, is meeting with pension experts to consider a system where a workplace pension could follow the employee, rather than employees joining new plans with each new job?

Kate Upcraft’s response to me was characteristically to the point.

“it would be a nightmare for employers of all sizes. Does anyone realise how time consuming it is to prepare and upload files given the industry refuses to work to one standard?”

If you are running your employer’s payroll, or a payroll bureau, then I imagine you’re not overwhelmed with the prospect of clearing contributions to an unlimited universe of workplace pensions.

Government triumphalism over the success of auto-enrolment belies the strain it has placed and continues to place on payroll.

Upcraft argues that DWP have never seen employers as key stakeholders as AE was really the first-time payroll operatives had had a major interaction with one of their policies. This certainly chimes with my experience of introducing payroll champions to Sir Steve Webb in 2013. But much has changed and the DWP’s Pensions Regulator is now almost as familiar to payroll as HMRC.

It would be easy to argue from this analysis that the pensions minister “should know better”.

But this would be to ignore evidence that the tectonic plates of technology are moving. This year we have seen the successful introduction of open banking, with faster payments now a reality. We are but a minor tremor away from open pensions which might yet make a pensions dashboard a reality in 2019. For Fintech, read Pentech, the Financial Conduct Authority is leading the world with its innovation hub.

Success of the pensions dashboard is predicated on the adoption of a set of data standards that could in time be adopted by payroll to “clear” contributions to the workplace pension of the employee’s choosing.

Certainly, this would help restore consumer confidence in pensions. The DWP estimate that unless some means is found to consolidate workplace pensions, we could be looking at nearly 50m abandoned pots by 2050. With the average worker expecting to start with 11 employers in a lifetime, “pot profusion” threatens to derail the AE Express.

While a dashboard might allow multiple pots to be viewed on a single screen, the prospect of organising some kind of retirement income from upwards of ten workplace pensions is daunting. Small wonder that Opperman’s open to the arguments of workplace pension providers.

Small wonder too, that workplace pension providers are looking to limit pot proliferation. The financial implications of managing millions of small pots and small potholders are dire. While they may not present an existential threat to NEST, NOW or People’s pension, they limit their capacity to bring down costs over time – and improve service. Some of these providers are openly touting ideas that to pension traditionalists seem as outlandish as “clearing” seems to payroll.

One of these ideas has been dubbed “prisoner exchange” and involves one workplace pension provider swapping thousands of abandoned pots with another provider. This time it is the provider – not the member – who is calling the shots, but the concept is equally fraught with risk.

If we take into account the advances in technology and the proliferation in pots, we can make more sense of Government interest in “workplace pensions following the member.

But it is still very worrying that payroll does not seem to have a seat at the Minister’s table. Organisations such as PensionSync have pioneered the technology that could make clearing possible. Indeed, PensionSync have commented on social media that a system of clearing could create a more transparent and efficient way to operate workplace pensions.

Payroll could be determining not just the shape of change but the pace of change. Pensionsync’s recent report on the (lack of) quality of the data reaching providers tells us AE compliance may not quite as comprehensive as the DWP would have us think. Payroll must impress on Government that no move to “clearing” happens, till pension providers and payroll can be sure that the single interface model is working properly.

From the feedback I am getting, even when new technology is in place, pension providers are still applying “lipstick to the pig”. Address errors on one insurer’s workplace pensions database, included data that had been imported by an API, it turned out that the API had been delivering data to an insurer’s spreadsheet which had then been used to manually key in entries onto the insurer’s system.

Some would say that you couldn’t make it up, sadly – that’s precisely what some manual updating has done. Until we have moved to straight through processing for all AE interfaces, we cannot contemplate moving to the fantasy of payroll offering universal clearing.

Posted in accountants, advice gap, Dashboard, dc pensions, pensions | Tagged , , , | 1 Comment

The Garden of pension delights!

Occasionally I should allow this blog to publish a vision of what pensions should be, rather than what they are – at least to justify it’s title! Here is my garden of pension delights , a place filled with the intoxicating air of perfect liberty


I will not talk of that demi- paradise that preceded where we are today, it is depicted in the left panel, I imagine that the right hand panel is governed by financial economists.

The five delights of my pension garden

  1. the freedom to choose or not to choose
  2. a CDC retirement default complimenting freedoms (but not replacing them)
  3. the option for employers to use CDC for auto-enrolment
  4. the option for employers to employ a clearing house for auto-enrolment
  5. a dashboard that makes sense of retirement options.

The freedom to choose or not to choose

Currently we have no choice but to choose, in short – no default way to spend our pension savings. This is not the case where our pension comes to us as a wage for life (the state pension and DB), but is the case with our DC saving.

A CDC retirement default

I would like to see a default introduced, once CDC has been properly understood and proved both in concept and practice – where a workplace pension nominated a post retirement strategy which required nothing from the member but to sit back and get the money.

Any other option – drawdown, annuity or cash-out, would demand a decision, the “wage for life” solution – using CDC principles would become the default for the millions of us who do not want to make a choice.

The option for employers to use CDC for auto-enrolment

A CDC scheme – in which an employer voluntarily chooses to participate, will have a target pension. The formula for that target might be n/80th of a percentage of notional salary but it is predicated on a money in/money out formulation. The outcome will be influenced by achieved investment returns , by changes in mortality, by all the variables of long-term pension accrual, but it is likely to be considerably more certain than the DIY individual system we use at the moment. It is also likely to be a lot more efficient as it disintermediates through the simplicity of its approach and through the economy of doing the same thing once for many thousands of people.

I would like all employers, whether on their own like Royal Mail, or in multi-employer CDC schemes to be able to switch to CDC. I don’t expect CDC schemes operating at auto-enrolment minima any time soon. The target pension for most people at current rates would look so small as to dispirit. I expect to see CDC as an employee benefit for employers who treat pensions seriously.


The option for employers to choose a clearing house for auto-enrolment

Right now, the law requires each employer to choose an authorised workplace pension for auto-enrolment. Employers can nominate more than one pension but few choose to do so, even when there is good reason (for instance net pay plans with no relief at source option).

My vision is that employers that choose to pay for the facility, could offer pension clearing to their staff using the technology we are increasingly calling “open pensions”. There are already organisations such as pensionsync that act as a hub for a number of providers. This “hub and spoke” principle could be extended over time so that all authorised workplace pensions might link to the hub using the common data standards and interfaces developed as we develop the pension dashboards.

A dashboard that makes sense of pension options

Increasingly, as they move towards retirement, people value their income from their work. This isn’t surprising, income is more vulnerable as you become less energetic. We crave a replacement income from the state, from work and from our private savings. This is why pensions matter.

Right now , dashboards are seen by Government and providers as a way of encouraging more saving, but by consumers as a way to see how much they can spend in retirement.

“Outcomes” – are almost always defined in terms of capital and it’s thought necessary to employ a financial adviser to convert capital into income. This clearly makes sense if all an individual has as choices require them to manage the nastiest hardest problem in finances. Since the old “wage for life” solution , is no longer a default (I mean annuities), the pension dashboard could become the means of comparing the risks and reward of drawdown, annuity, cash-out and CDC.

In my vision, the wage for life solution is the new default (or rather a reversion to scheme pensions as managed before mandatory indexation and the various funding regimes introduced over the past thirty years). For those who want to look beyond the default – to annuities, drawdown or cash-out, there needs to be a way to test the suitability of each. I would call this a test-drive. The dashboard could be used as a pension simulator allowing people to test-drive each option.

A garden of pension delights

There are two things that need to happen for my garden of pension delights to take seed

  1. We need to adopt the new technologies on which these solutions are based
  2. We need to have the cahoonas to innovate and adopt change

I don’t know what the timescale for the delivery of my vision is, but it’s been in gestation for the nearly ten years I’ve been running this blog!

As I’ve been typing this article, the sun has risen over the horizon as I look out towards the Isle of Wight. A small fishing boat has made its way across my line of sight and is caught in that moment when it crosses the pathway made by the sun on sea.

This picture seems this morning a symbol of what might be, the hope of a better system which illuminates afresh what we have always wanted , but failed to achieve.

fishing boat




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“Pentech” needs to lead or the dashboard won’t work


The dichotomy between old and new skool pensions has rarely been so well displayed as at Wednesday’s Pension Dashboard Summit

  • Enterprise v Start -up
  • Consumer led v business case
  • Big Government v entrepreneurs
  • ABI v open banking
  • Saving v Spending
  • Prospective v Retrospective Governance

The conference showed the chasm between those who just want to do it and those who want to follow due process.

The frustration of those who followed due process, created the pilot and watched their work grow old on the digital shelf, was very evident. It was matched by the concerns of those like Romi Samova and Chris Sier who have watched “nothing happen” since the DWP took the project over last year.

The DWP’s problem is clearly in decision making. Does this dashboard project follow conventional lines with business rationale’s feasibility studies, consultations and prototypes. Or does it follow the open-banking model where the banking industry was told by the CMA to find a way to “open banking” – and did.

In retrospect, the decision to hand over the reins to the DWP by the Treasury was a bad decision. The Treasury has championed Fintech and has clear skin in the game. It’s regulator – the FCA – has its innovation hub and its Sandbox, it also has a massive budget. By comparison, the DWP has a noble but underfunded regulator in Brighton, which – despite the success of auto-enrolment implementation, has virtually no experience of pensions.

Faster pensions

Today has seen a big step in the governance of faster payments with a consultation launched that would make banks responsible for the prevention of fraud  by making banks liable for the consequences of fraud. I have not heard of such a thing with relation to the pensions dashboard, but it is easy to see a replication of the principle.

The issue of retrospective governance of faster payments (at the core of open banking) is critical as faster payments are now part of our lives. Cash doesn’t so much burn a hole in the wallet, as get glued to its sides. I have notes in mine that have been there some time!

If the pensions dashboard means one thing to the population , it is that their pensions money becomes real and spendable. While we have faster payments, we have not yet had faster payments. Try to drawdown your pension pots and you will have mixed success!

What the ABI and other old-skool dashboard advocates haven’t recognised is that in countries which have dashboards, it is the over 50s who are the main viewers. They are preparing to rely on their retirement savings and pensions and need a high level of visibility of what they’ve got in terms of prospective income and capital.

The relentless mantra of the old-skool dashboardeers is that dashboards will improve saving. I am sure that most people, when they think of dashboards aren’t thinking of saving more – but spending more.

Dashboards for most of us mean faster pensions – whether “pension” means one big payment or a “wage in retirement”, faster pensions means access to money.

Dashboards = Faster Pensions = Better access to money in later life

Enterprise v start up

Old skool enterprise struggles to achieve the agility and energy of start ups. The Aviva digital garage is one attempt to bridge the gap. Another is L&G’s colossal funding of Smart Pensions. Old skool insurers have worked out that they are least able to deliver digital innovation of the type we’ve seen in open-banking. They turn to partnerships of open self-contained digital annexes to ensure that innovation happens without the obstruction of enterprise.

The Government should recognise this. Open Banking didn’t happen just because RBS, Lloyds, HSBC and Barclays pout their hands in their pockets. The main driver was the challenge of the challenger banks.

The DWP face a situation where it has relied on old-skool insurers to deliver digital innovation. They have come up with an old-skool website – which already looks totally out of date. The whole concept of a standalone dashboard now seems quite absurd!

A dashboard needs to embedded in something – a car, a plane – a pension plan. But to imagine embedding a dashboard that brings the state pension and other private plans (DB and DC) to where individuals are managing their money, seems quite beyond the old skool.

Meanwhile the scrapers (Yolt, Moneyhub etc.) struggle on showing us how it could be done. When we move on from individual log-ins to a single secure log-in, when every interface is a properly coded API and when 80% of the information we need is available in real time, we will have a dashboard. The prototype is an upgrade on a PowerPoint presentation.

Leaders not committees

The people who get things done in financial services these days, don’t rely on the DWP to issue a paper, they do it. Chris Sier made the IDWG happen by showing the FCA he could do it. Romi Samova is changing the way millennials save, by just doing Pensions Bee and Andrew Evans is showing that a Pentech can work within the world of occupational pensions by making Smart work.

These are to Pentech what Ann Boden and Anthony Thompson are to open banking and the wider Fintech.

The DWP should be talking more to Chris Sier, Andrew Evans and Romi Samova – and rather less to itself.

A way forward for the DWP

It’s time to let those entrepreneurs just do it. It’s time to orientate the dashboard towards the consumer by recognising that it’s about spending not saving. It’s time to drop up-front governance and regulate retrospectively. It’s time to start listening to entrepreneurs and not the ABI and it’s time the DWP started supporting the entrepreneurs who will make this work!

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Pensions dashboard – for the consumer or the industry?


chris sier



Yesterday I suggested that the Pensions Dashboard Summit being held in London was likely to be “feisty” – it was. The organisers chose to put the event under Chatham House rules, as if a debate about transparency can be held under a tarpaulin.

I am restricted in who said what, but I can say what was said. Broadly speaking the room fell into two camps. One camp, which I belong to, decided that as everyone wants a dashboard, we should “just do it”.  The other camp – more circumspectly, considered following DWP’s due process, waiting for the infamous feasibility study (still sitting in Esther McVey and Guy Opperman’s out-trays – six months late on delivery).

Perhaps the best articulation of the “just do it” camp came from one of three wise men who’d arrived from the East (well Denmark, Belgium and Holland to be precise)

These wise men were pretty scathing about our dashboard decision making process (though they may have been deferring to wider decisions in this comment.

With both the DWP and tPR at the Summit it was left to the ABI and to People’s Pension to assert the rules of due process.

As the bloke sitting beside me put it, if we wait for due process on governance, we’ll not just be retired by the time we get our dashboard- we’ll be dead.

Who was breaking ranks?

One person created the debate yesterday, Dr Chris Sier. The Chair had asked the question in his opening statement “who’s the dashboard for, the consumer or the industry”. Sier did not duck it. For him the dashboard was for the consumer and in an impassioned cry to give pensions back to the people who own them, he stated his position.

Providing data on your pension to the place where people are (a properly positioned dashboard) should not be compulsory). But the failure of someone controlling that data to provide it back to its proper owners – the consumer – would be at best immoral and at worst a breach of the Data Protection Act 2018.

For the industry or the consumer?

Chris Sier was breaking ranks in stating what is blindingly obvious to the wise men, that you do the right thing by consumers – or face the consequences.

With the wrath of exclusion, our #1 pension journalist railed against the conference from her desk in Southwark.

Jo’s misgivings were well-founded. The vast majority of the people in the room had vested interest in the provision of a commercial dashboard and it was clear why.

Why the shrill cries for compulsion?

Whenever the pension industry calls for compulsion, it’s compulsion on their terms. The ABI’s view of compulsory participation in the dashboard is that it will accelerate cash flow into insured savings products and away from what we properly call “pensions”.

Talking to the three wise men after the event , it appears that most people who consult overseas dashboards are at the end of their saving journeys. They are people who are looking to spend their retirement rights, whether State, occupational or what they call third pillar and what we call personal.

Not only is the pensions industry wrong in thinking that dashboards will increase pension saving, they are ignoring obvious, dashboards can control spending.

Dashboards can also provide diagnostics on the state of the car’s engine and tell drivers about fuel economy, past performance and whether the current car is fit for future use. None of which was much discussed yesterday.

Who owns the dashboard?

In an astonishing outburst, one delegate criticised those in the room coming to the dashboard debate for the first time for asking such questions as “what’s the dashboard for?”.

Clearly the group of 17 providers who’d answered this question as part of the dashboard pilot project thought they’d nailed it

Pensions Dashboards will enable people to view a snapshot of their pensions, online, via the portal of their choice.

Some industry experts have suggested that pension dashboards may deliver:

  • Better understanding of their likely finances in retirement, based on their current situation
  • Clearer grasp of the need for financial advice
  • Motivation to increase their pension contributions
  • And more inclination to take a proactive role in managing their retirement.

For the industry as a whole, a better informed customer should lead to:

  • reduced administration

  • increased competition on a level playing field

  • greater clarity surrounding the provision and nature of long-term savings products.

This is – I suspect a “business justification” for providers. It is not exactly a consumer charter!

And of course the agenda is very much about reinforcing the insurer’s traditional lines of distribution (this is from the consumer facing side of the dashboard prototype website)

Pensions dashboards will show you what you’ve saved so far. They’ll also show you an estimate of what that may be worth in the future.

For more information you will need to speak to the pension providers direct, to one of the free advice services, or to a financial adviser.

A financial adviser can help you plan ahead and explain what happens if you take some of your pensions as cash or income.

In my view, the prototype was designed by the industry for the industry  as a means of further fee extraction. The DWP are right to question whether compelling us to support such a project is in the public interest.

The dashboard cannot serve the 10% of people who take financial advice, it must serve the 90% of us – who don’t. Right now – the pension dashboard is owned by people who are interested in profit maximisation of their organisations and their supply chain.

This has to change.

Will Governance make a difference?

Gregg McClymont – who spoke yesterday – has a quite different view from Chris Sier’s “Just do it”. I suspect he thinks Dr Sier quite mad. I suspect that so do the ABI/IA/PLSA and all who sail with them.

You can read Gregg’s views in Financial Adviser, he would hand the Governance of the dashboard to the yet to be created Single Guidance Body (or whatever they re-brand themselves). This is likely planning to build a skyscraper on a swamp. It may never get off the ground and if it does, it will sink beneath its own weight.

The governance model for open-banking (something we heard a lot about yesterday) was light on governance and depended on “test and see”. The agility that Fintech brings is just that, a way of testing what works with ordinary people – rather than assigning a purpose to the dashboard (see above) and building to satisfy the purpose (aka provider business justification).

Establishing the McClymont Governance model would almost certainly play into the hands of the pensions industry and exclude the consumer – as Jo Cumbo saw the consumer excluded yesterday.

Governance – in the sense Gregg wants it – will sink the dashboard without trace.

Is there a governance model that works?

I’m sure there is and I’m sure it will emerge from “test and see”. To presuppose what that is, as almost everyone in the room – wanted to – would be a big mistake.

People will voice their fears about the handling of their data and a governance model should be built around the research of Experian who tell us that 72% of the public do not trust their financial data to be shared.

Experian sponsored the conference and constantly shed light on the consumer’s viewpoint. Like Chris Sier, they saw the answer in testing what worked for ordinary people. Sier’s vision, to test the dashboard hypothesis in the controlled environment of an FCA style sandbox, is the only credible governance model I saw yesterday.

If we are serious about building a dashboard for consumers we should not “just do it” we should “do that”!


Gregg McClymont

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

#pensionsdashboardsummit – it could be feisty!


feisty horse power


I’ll be off on a Boris Bike to Marble Arch in a moment to the Pension Dashboard Summit at the Arum Hotel.

From the opening session , which pitches Chris Sier together with L&G supremo Chris Clarke, this looks likely to be a lively, controversial and even fiery day.

The pensions world is divided between those who want a strong and centralised dashboard financed and run by DWP and those who want the private sector to deliver – perhaps through multiple dashboards. This polarity precludes a third option – hardly anyone thinks we don’t need a dashboard!

I’m pleased to see the conference will be chaired by Simon Kew – who is of course the lead singer in the Pension PlayPen’s house band “the racket of the lambs”. We hope that he won’t have to raise his voice to quite the extremes witnessed at the 100 club (see video below).

What the debate’s really about.

The key issue is whether we can have in “pentech” what the banks have got from “Fintech” – open pensions (alongside open banking).

Two years ago, nobody believed that Open Banking would happen. Today it is a reality. Hardly a day goes by when a new challenger teams up with a banking giant to announce a new venture. I have in my wallet, cards from Metro Bank, Revolute and Starling – I have business accounts with all three!

Open Banking means that I can see through apps like Emma and MoneyHub all my accounts on one screen. It’s handy for me to have more than one bank as I have different needs catered for from different services (FX, pensions, budgeting as well as standard banking services).

It will be the same with pensions. Most 50 year olds are looking forward to something from their workplace pension(s) , if they’re lucky – some will be in pension form , if not – they will at least get a capital reservoir to draw down as they please. On top of this – there is the prospect of a state pension – now greatly enhanced because of the triple lock.

The hope is that – in time – private pension pots will be able to be aggregated as the various bits of the state pension have been aggregated (OAP, graduated, SERPS, S2P).

But before you aggregate you need a pension finding service to put you back in touch with all the bits and pieces you started yourself- or you had started for you by your employer.

Can this pension finding service happen within the private sector- there are plenty of sponsors of this conference – who will tell you it can. The DWP has taken their word for it and intends to hand them the job (even if it holds on to the reins).

feisty horse

feisty horse

What needs to be done

Speaking with Charlotte Clark of the DWP about this earlier this month, she reminded me that handing things to the private sector is the start of the job – not its end. The real work for both the private sector and for Government starts here. Well actually it started in 2016 when Government last passed this on to the private sector (but let that lie!).

I think two things need to be done before we have “open pensions”.

Firstly , the private sector had better organise itself so that it can deliver data from A to B using a common data standard and a common application interface. In layman’s terms, the data needs to sent and received in a common way.  Romi Savova of Pension Bee is proposing a committee be set up – by the private sector to agree what this standard looks like. I totally agree, so does Chris Sier (who recently did this for the funds industry with  the IDWG).

Secondly we need to have as effective a force to make open pensions happen, as the CMA provided in making open banking happen. The Competition and Markets Authority (by all accounts) did a fab job with the banks- getting them to adopt Fintech. The DWP has a tough job meeting that standard and I’m not at all sure they think they’re up to it. But if they feel they don’t have the resource or expertise, perhaps they could get the excellent people who led the open banking project to teach them how they did it! Alternatively, just ask the CMA to repeat the dose!

These two recommendations, one for the private sector, one for Government are my next steps for the pensions dashboard.

Why this matters to me?

At a personal level, I have aggregated my DC pensions and will only have three pensions going forward -what comes out of DC (or perhaps CDC), what comes out of my DB pension and what I get from the State. It would be nice to see my future income on a single screen as I approach the sixth decade of my life!

But there are many not so fortunate as me. Many have their pension pots spread over a variety of providers – DC occupational pensions, personal pensions , stakeholder pensions, SSAS, SIPP – goodness knows what else!.

It is very important that we give people back a sense of ownership of their money.

This can best be done by helping them to find their pensions

Once we have found the pots, we should be able to help people understand how their pensions have done, whether they’ve had value for money from their contributions and whether there may be a better place for their money going forward.

Another survey was published this week by the FCA which again told us that less than one in nine of us were taking financial advice and only one in three of the people who really should be taking advice, went anywhere an adviser.

Why the pensions dashboard really matters is that until people know what they’ve got, they won’t be able to take advice – in whatever format that advice arrives. I define advice as “the provision of a definitive course of action” or “telling people what to do”.

You can’t really give advice until you know the facts. Facts in a financial sense come from data and data comes through a dashboard.

It really is as fundamental as this. If we want people to manage their pension freedom properly – we have to give them the information on which their decisions can be taken.

We need a dashboard and soon. Let’s hope this Conference moves the debate a little faster!

With so much at stake, look out for an action packed day – and some feisty moments!

Posted in age wage, Pension Freedoms, pension playpen, pensions | Tagged , , , , , , , | 1 Comment

The Gravy train is still at the station!


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

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

Should it be

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

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

Who/where were the guests?

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

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

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

Why this conspicuous consumption?

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

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

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

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

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


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

Not a lot of diversity- huh!

This is where your money goes

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

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

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




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

Are you and your savings “retirement ready”?

age wage


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

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

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

Income continuity?

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

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

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

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

Continuity or guarantee?

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

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

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

Why do I sound so confident?

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

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

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

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

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

Getting retirement ready with AgeWage.

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

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

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

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

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

age wage simple

Just an example

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

What AgeWage does.

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

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

What AgeWage doesn’t do

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

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

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

Getting retirement ready

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

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

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

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

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

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

age wage

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Pensions that make you want to live longer!

Henry cheers

The way things were!

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

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

Incentives to live

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

A DB pension is an incentive to live longer.

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

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

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

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

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

A DC pot is a disincentive to live longer!


Can I have the best of both worlds?

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

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

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

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

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

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

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


Henry Tapper

How I want to be (Again)!

Posted in CDC, pensions | Tagged , , , , , , | 5 Comments

Shaking up pensions with Quietroom

quietroom shaking.PNG

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

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

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

About the Event

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

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

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

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

shake up.PNG

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

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

Well done Quietroom

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

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

making 2.PNG

New livery – new approach

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

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

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


First my concerns

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

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

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

Second , my applause

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

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

Lesley Titcomb 10.png

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

So what’s new?

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

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

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

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

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

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

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

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

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

When’s this happening?

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

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

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

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

A clean bill of health?

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

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

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

making workplace pensions work

Desktop version



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

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



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

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

But to the questions

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

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

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

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

But I am guaranteeing nothing!

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I was ashamed of my pension colleagues

Michael johnson

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

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

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

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

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

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

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

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

A truly awful second half

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

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

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

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

Royal Mail as a case study?

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

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

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

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

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

Staggering arrogance of an over-indulged pension elite.

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

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


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“Green pensions” consultation gets record response.

Green 4

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

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

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

So this Government paper matters.

Clarifying and strengthening trustees’ investment duties

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

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

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

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

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

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

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

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

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

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

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

Guy Opperman MP Minister for Pensions and Financial Inclusion

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

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

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Pots follow meerkats?


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

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

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

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

Pot proliferation is a threat to workplace pensions

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

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

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

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

Government intervention may not be the answer.

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

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

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

What can providers do?

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

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

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

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

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

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

1.  Compare the meerkat?

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

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

2. Use popular routes to talk with members?

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

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

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

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

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

3. Get digital?

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

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

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

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

Making it happen!

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

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

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

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

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

— David Veal (@DavidVeal12) September 9, 2018


Sun comparison.PNG

AgeWage hopes to be part of that process!

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

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

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

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


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

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

Should the USS follow suit and become a CDC?

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

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

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

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

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

Should the members decide?

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

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

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

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

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

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

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

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

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

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

walk alone.jpg

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

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

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

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

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

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

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

Revealing bad news

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

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

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

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

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

Can individuals make sense of so much data?

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

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

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

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

What I am wanting to do.

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

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

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

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

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

Was Frank Field right to mention Hillsborough?

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

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

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

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

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

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

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

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

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I want to choose my dashboard please!


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Help with pensions

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

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

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

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

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

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

Three good reasons to be a pension dashboard provider

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

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

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

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

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

The Dashboard is dead – long live pension dashboards!

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


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“Are people that dumb?” Compulsion and dashboards.


Are people this dumb?

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

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

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

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

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

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

Compulsion – the last refuge of the ABI.

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

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

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

Would an incomplete dashboard hurt us?

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

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

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

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

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

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

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

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

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

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

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

What’s to be done.

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

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

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

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

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

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


not workplace pensions

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



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Whitbread – treat your baristas fairly.


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

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

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

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



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

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

Sorting NET-PAY doesn’t COSTA lot.

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

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

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

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

Why net- pay – anyway?

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

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

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

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

Why NET-PAY might cost a lot!

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

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

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

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

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

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

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

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

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

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

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

Whitbread – you are not alone.

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

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

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

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

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

Let’s nail NET-PAY now



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Frank Field – a Labour warrior.

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

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

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

Frank Field

Still Frank

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

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

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

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

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

Holding the Government to account


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

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

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

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

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

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


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


Dear Nick,

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

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

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

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

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

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

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

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

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

Best wishes,

Frank Field

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Why every hidden cost matters.

Value recognised

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

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

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

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


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

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



Value delivered?

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

true and fair3

Job done?

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

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

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


Job not done?

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

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

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

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

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

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

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

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

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

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

Why do transaction costs matter?

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

Novarca template

Novarca’s reporting template.

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

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

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

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

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

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

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

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

true and fair



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By the time I get to Phoenix

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

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

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

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

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

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

What the £68m write down means

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

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

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

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

A gift horse?

gift horse 2

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

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

Why it pays for Phoenix to reduce exit penalties.

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

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

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

There were two assumptions made at the point of sale

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

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

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

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

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

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

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

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

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

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

Exit penalties and “nudge” – treating customer fairly?

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

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

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

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

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

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

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

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

carrot stick horse

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

What is needed.

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

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

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

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

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

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

The devil and the angel in the Phoenix

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

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

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

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




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


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Who cares? And how do we pay them?


Except Care isn’t free

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


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

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

We all care.

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

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

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

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

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

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

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

The ISA – the last refuge of a lazy policy maker

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

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

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

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

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

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

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

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

Rewarding those who care

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

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

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

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

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

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

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

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The “wonder” of wealth

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


Doorman at the Corinthia Hotel

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

I wonder about wealth!

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

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

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

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

That’s the wonder of wealth management.

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

eugen platform.PNG

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

The same old crew who loved Equitable Life

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

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

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

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

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

We love our clubs

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

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

I hope Eugen writes his study of HL investors.

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

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

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

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

Other clubs are available


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

irrational complacency.jpg

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

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

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

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

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

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

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

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

The FCA fully understand the problems they are identifying

Take these additional issues raised later in the paper

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

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

Who can address these platform problems?

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

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

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

Where SJP and HL lead…

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

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

Dissenting voices

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

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

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

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

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

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

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

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

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

vanguard 6.jpg

There may be trouble ahead….



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Mr N – a corrupted system and natural justice


Putting things right with the lawyers

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

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

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

Putting things right with the trustees

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

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

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

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

Calling casuistry when you see it!

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

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

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

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

As I have written earlier, Mr N is a hero

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

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

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

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

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

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

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

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

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

Natural justice alive and well in the 21st century

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

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

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

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

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

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

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

edward brown.jpg

Edward Brown

Posted in pensions | 1 Comment

Why funds should be free!

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

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

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

henry fund managers.jpg

Seemed a reasonable question…

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

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

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

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

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

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

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

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

fund costs 4.PNG

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

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

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

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

Fund 7.jpg

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

fund 8.jpg

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

The other side of the coin

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

Robin Powell has been interviewing clever people who explain why

fund 10.PNG

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

Before I get carried away..

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

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

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

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

fund 15

And finally for advisers…

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

fund 16.PNG

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AgeWage submission to the WPC on Pension Transparency

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

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

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

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

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

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

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

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

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

Henry Tapper

August 9th 2018

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Do IGC’s improve our value for money?

value for money

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

Are Independent Governance Committees effective in driving value for money?

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

On the composition of IGC boards

In as much as…

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

IGCs are failing.

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

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

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

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

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

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

On the effectiveness of individual IGCs

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

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

IGC review 2018 full

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

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

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

IGCs are invisible to the people they serve

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

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

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

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

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

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

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

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

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

Do IGCs understand Value for Money?

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

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

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

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

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

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

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

Do IGCs deliver value for money?

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

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

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

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

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

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

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

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

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





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How can savers be encouraged to engage with their savings?


pension bee trust pilot

Engagement engendered by trust

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

WPC questions

Today’s exam question…

How can savers be encouraged to engage with their savings?

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

  1. Direct ownership

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

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


Source – FCA

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

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

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

People want to invest well

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

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

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

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

But the problems of agency too often prevent this.

Share action report

The alternative way

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

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

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

Seeing what is going on

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

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

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

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

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

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

direct investment

The site the steelworkers didn’t see

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

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

2.  Trusted stewards

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

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

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

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

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

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

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

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

3. Digital engagement

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

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

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

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

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

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

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

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


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

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

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

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







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


Shedding light on financial markets

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

Today’s exam question is;

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


My Simple answer;

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

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

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

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

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

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

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

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

Too much meddling.

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

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

Not enough accountability

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

Nor transparency

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

age wage simple

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

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


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

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

How a policeman may have changed pensions for good!

northumbria police

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

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

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

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

Why this is so important

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

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

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

Why Mr N is a hero

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

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

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

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

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

He still has the £25,000 bill to pay.

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

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

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

What the judgement means

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

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

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

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

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

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

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

The wider impact on pension schemes

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

The Pensions Ombudsman’s judgement is explicit

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

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


The papers the Authority failed to deliver



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

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

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

The impact on Pension Scheme Administration

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

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

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

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

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

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

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

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

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

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

Where does this end?

There is already a long queue at the Pensions Ombudsman’s door, it includes a number of former clients of Active Wealth Management and other firms who advised steelworkers to get out of BSPS. It will now get longer as other former members of occupational pension schemes, seek to get back on board rather than rely on depleted pension funds investing in everything from Cape Verde property to the Strand Capital fund.

Were these claims all to succeed, the liabilities currently expected to fall on FSCS , could fall on trustees – or their TPAs or their TPA’s professional indemnity insurers.

So the Determination will be being read with some interest by all these parties.


Mr N is a hero – but I can see him being cast as a villain

I will say this now, and hope that I am proved wrong. Mr N is likely to be considered not as I have described him, but as a troublemaker who costs shareholders and pension managers and administrators and trustees and sponsors and insurers money.

I expect to see the Pensions Ombudsman’s decision being challenged. It may be that legal arguments will prevent others being restored to their schemes.

Mr N took the pain of the past four years, perhaps advantaged by his being a serving policeman who was familiar with the workings of the courts.

But the strain that doing so put on him and his family was severe and it’s hard to underestimate his bravery. The criminal proceedings are still to come and I don’t want to prejudice them by publicising this Determination in an irresponsible way.

But  I will finish, by commending the Pensions Ombudsman’s Determination to anyone who is interested in justice for those like Sue Flood (a pre 2014 victim) whose losses and sufferings are just as great, but who risk being forgotten.

We do a great thing in running pension schemes for people and we should be aware that sharks live in the waters that surround them. £36.8bn was transferred out of our schemes last year and not all of it went to good homes.  This Determination gives those championing the Pensions Regulator’s Statutory Objective “to Protect Members” , will welcome this judgement.

Mr N is a hero!

mr N.png

He is no villain – nor are other pension fraud victims

scamproof scorpion

Posted in pensions | 7 Comments

Reach out and touch – success is a state of mind!


Yesterday the FT published an article with a headline many predicted we’d never read again.

“FTSE 100-backed pension schemes move from shortfall to surplus”

About the time the article was published I received a mail from someone who turned out to be the chair of trustees of one of these FTSE 100 schemes. Ostensibly this was about catching up with a mutual contact but it soon turned out that said trustee wanted a chat about his frustrations.

He was fed up with demanding money from his sponsor to plug what he considered a spurious pension scheme deficit, fed up with artificial funding targets that set the solvency bar ever higher and fed up with investing money into bonds at the wrong time.

I am not an expert in funding, but I know enough to sympathise. Apparantly he’d read one of my blogs (probably a FABI one) and felt like I’d provide a shoulder to cry on.

Need a shoulder to cry on?

First Actuarial provides a shoulder for frustrated trustees to cry on if you are

  1. An actuary fed up with working on “project fear”
  2. A trustee fed up with demanding money from sponsors, only to pour it down the drain
  3. A sponsor trying to run a business but being constantly harassed by actuaries and trustees.

We also provide shoulders to Financial Economists who have seen the error of their ways, Pension Regulators (ditto) and to the investment consultants struggling to come to terms with being regulated by the FCA.

Need a port in the twitter-storm?

If you find your timeline intruded by Financial Economists or their Bots, then tweet to @firstactuarial or @henryhtapper using #FABI.

We’ll calm the raging waters created by gilt plus valuations by smoothing your funding position using the ideas behind the First Actuarial Best Estimates Index ( #FABI).

We’ll call you and provide you with the love you need and deserve  – explaining how to avoid Financial Economists and their pernicious dictats!

We’ll speak with you with the tenderness that you need , having been brutalised by pensions these past ten years.

Reach out and touch!

You know that nothing worthwhile is ever achieved without taking on good risk. Reach out and touch the spirit of First Actuarial, a spirit of endeavour that sees “going for it” as good and “risk free” as a luxury your scheme and sponsor can probably not afford.

We’re entrepreneurs, we’re still in start up mode (though 300 strong with a £20m turnover). We disrupt Neanderthal thinking and encourage our people to think for themselves.

So if you are the Chairman of a FTSE 100 backed pension scheme or the humblest workplace pension scheme – reach out! We’re here to make pensions work and restore people’s confidence in their retirement planning!

Posted in advice gap, First Actuarial, pensions | Tagged , , | 1 Comment

Boomers struck down by Financial Constipation


Ok- so it’s American – but you get the picture!

I have four points to make about the figures published by HMRC on taxable drawdown yesterday

  1. The amount being drawn down is a dribble
  2. The drawdown is consistent over time – people are drawing down on average £30k pa
  3. These are the taxable figures- we can assume that 25% is being skimmed for tax free cash (which could be added into the totals to suggest total cash out)
  4. Boomers aresuffering a bout of financial constipation

But first – here are the numbers!

HMRC drawdown

The amounts being drawn down are a dribble

Here’s John Lawson’s perspective (which I share)


Not only is the amount coming out , puny, compared with the amount going in , but it’s puny compared with the pensions being paid from occupational pensions (four times as much). Perhaps more worryingly – the amount being drawn down is – in total- less than a quarter what was transferred out of DB schemes via CETVs. By any measure, drawdown is a half-opened tap .

The drawdown is consistent over time at £30k pa+

If you compare the growth in drawdown over time , you see a fairly consistent picture in terms of growth.payments hmrc

What appears to be going on is that people are drawing down more in the early part of the year and easing off in Q3 and Q4, even so – the typical annual drawdown is over £30k.

Since we know that on average , people have just over £30k  in their pension pots, this either suggests that drawdown is happening from the “rich person’s pots” or people are fully cashing in.

My suspicion is that it is mostly the former , but if we follow the 4% rule (where you only drawdown 1/25th of your pot value, this suggests that average drawdown pots are £750k + . If you add back in the tax -free cash, not shown in these numbers, then you’d expect drawdown to be a sport for pension millionaires.

The numbers are of course diluted by those with small pots taking all their money at once (which may be tax-efficient) and the odd Pension Muppet, taking all his/her money at once – making HMRC’s day. I know that someone will comment that there are the odd time when it is worth pension busting and paying 45% on most of it – but we are talking here of “mainstream”.

The alternative reading is that some people aren’t drawing down at the 4% rate , but burning cash at much higher rate – with heroic assumptions on mortality/inflation and investment growth.

Whatever way, these numbers do not suggest that people in drawdown are typical of the nation as a whole! I would characterise drawdown currently as a financial freak show.

These drawdown numbers may be undercooked but…

What we are being shown is what HMRC get via Real Time Information as the taxable element of money withdrawn. Up to 25% of all “crystallised” pots can be taken tax-free and probably has been, suggesting that the £17.5bn  drawdown since April 2015 probably needs to be inflated to something closer to £25bn.

Even so, this is a tiny amount of money relative to the amount paid from annuities, occupational pension schemes and of course the state pension!

The pension freedoms are in no way the universal payment system for the UK’s elderly population. Drawdown is a sideshow- a financial freak show. If the FCA considers that the exercise of pension freedoms is the critical success factor for retirement outcomes, they are ignoring the data.

So what is happening to all the money?

The official line (in the absence of comment from our Pensions Minister) comes from a former Pensions Minister – Steve Webb

These figures show the continuing popularity of pension freedoms. In the latest three months over a quarter of a million people took the opportunity to make flexible withdrawals from their pension, and withdrawals were at a record level. The key challenge is to make sure that more people take advice and guidance when deciding how to access their pension savings so that they do so in a sustainable way that meets their objectives’.

Well 94% of us are not taking advice Steve.  The 6% of us that are – may be drawing down advisedly – but pension freedoms, like financial advice, seems to be a minority sport!

So where is the money going – I suggest our pension savings are currently going nowhere. As John Lawson’s tweet suggests and the ONS MQ5 tables confirm, money is going in but it’s not coming out. We are hoarding our pensions – or perhaps suffering from FINANCIAL CONSTIPATION.

Perhaps this is because, finding a way to spend our retirement pots is – as William Sharpe puts it – “the nastiest, hardest problem in finance” . That comment comes from the man who figured out how to price portfolios via the capital-asset-pricing model, and how to measure risk via the “reward to variability ratio,” or what has come to be known as the Sharpe ratio.

If William Sharpe can’t solve the drawdown dilemma, is it any surprise that neither can the 94% of us who don’t have brilliant advisers – who can!

The obvious conclusion to all this, is that we need a new way to spend our savings – and we all know where I am going on that.


Posted in advice gap, Blogging, Fungible, pensions | 3 Comments

AgeWage – our journey (destination and timetable)

agewage snip



AgeWage has laid out in its mission statement who it hopes to help and why. But we’d like to be specific about what we hope to do and when. This blog sets out our specific intentions.


We believe that everyone needs to understand their retirement savings and have help in how they spend them. For younger workers, this is about investing for the future, for older people it’s about making the best of what they’ve saved.


Only about 1 in 10 of us takes formal financial advice and often that’s only to achieve a specific goal like buying a house or unlocking a defined benefit pension scheme. At the end of our journey – we see AgeWage becoming the comparison service that enables people to compare what they’ve got with what they could have and make rational and sensible decisions on their own.


Our long term aim is to be the Pension Aisle in the Money Supermarket, the Compare the Pension Market. We may even become a standalone  comparison service. We expect to be able and  authorised to deliver a whole of market comparison service by the beginning of 2020.


Between now and then we will be “mapping the pension genome” by working with partners to fully understand the needs of specific groups of savers.


This means that immediately we will be working with insurers and master trust providers on specific projects. For instance we are working with one insurer keen to migrate some part of its back-book into modern policies which would clearly better suit the majority of legacy policyholders. We expect to be working with some of the major master trust providers helping them to avoid “pot proliferation” by enabling members to permit the transfer of small pots from one master trust to another.


While we are working with insurers and master trusts we will be working with Pension Bee, who we are proud to be our first customer. Pension Bee want to help their customers to bring together pots they’ve built up with other pension providers. We’ll be giving their customers and the Bee Keepers who support them, the information they need to take decisions on what to do.


While all this is going on we’ll be working with the Regulators and especially the FCA , testing three hypotheses,


  1. Are the AgeWage Value for Money Scores right?
  2. Do they encourage sensible behaviour in people getting them?
  3. Are these scores providing guidance or advice?


We’re committed to being totally transparent about what we do and we intend to tell our customers, our partners and our regulators exactly what we are up to and what we intend to do in future.


There’s no room for secrecy when your aim is to simplify and explain!

agewage vfm

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45 minutes from Gatwick – Holland seems a world away!


I’m living on a boat in  Amsterdam harbour for the next two days. I intend to chair the Eurovents Pension Summit at the Radisson Hotel when I’m on dry land.

I did this last year and I swore then I’d come back and give me a couple of days out of blighty without getting out of the business rhythm.

 I doubt I’ll be swanking it about like I did last year, this year’s agenda is very focussed on how we can all make money from going digital.

When the Dutch say “all”, they don’t generally mean “all my mates”, they mean everyone. This came as a salutary lesson to me last year when I found myself being told to keep my nasty British cynicism to myself.

Since then, I’ve had the pleasure of spending a lot of time with Dutch pension people (none of whom would call themselves experts). They are genuinely interested in making money, but through the creation of efficiencies, rather than at the expense of the best exploited.

So I’m looking forward to spending time with the Dutch, and not spliffing up or shouting across the Bulldog. Amsterdam is a fine place and its red-light district is now no more than the Disneyfication of smut. The Dutch are splendidly humorous about the sleaze, well aware that for most people Amsterdam is sex and drugs and happy to sit outside the smutgarden with a cup of coffee or a glass of beer.

Last night I spent some time in a pub near my barge, drinking strong Bok beer  – and hearing how Amsterdam was empty of proper jobs. Even the prostitutes can’t get work because of the gawpers standing in the way of their shop-windows.Bok.jpg

“Real proper jobs” – defined by my barman as jobs that involve social purpose have been replaced by what he saw as “ephemeral” – appealing to the whims of tourists.

I was the only tourist in the pub and there was much commiseration for me from people who considered our impending departure from the European Union very much our problem

I will be reporting back – via twitter and the blogs – on events in Holland and I hope that I will learn a little not just from the Dutch but from the array of nationalities that I’ll be with. We are in danger of losing our links to the Continent and that’s crazy. It took the plane 45  minutes from runway to runway. That’s shorter than the train from Waterloo to Windsor.


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Simplifying pensions with AgeWage

agewage snipA number of people have asked about “AgeWage”, so I thought to write an article introducing it and why I and our management team are so excited about what it will do.

A good business plan should start with a problem, the problem we have with pensions is that pensions is a problem – where do you start?

Why do people’s eyes glaze over when you ask them about their retirement planning? The answer is always “because pensions are so darned complicated”.  Well they’re not, a pension is a wage in retirement – it’s an age-wage.  We set out to keep pensions that simple!

How are we going to spend our retirement savings?

We’re all told to save for retirement, but what are we going to do with those savings? We spend a lifetime saving but no-one gives us much help in spending! AgeWage will help people who have savings – to organise their money so that it’s easy to spend.

There are three problems that we have when we start thinking of winding down

  1. What we’ve got
  2. What it’s worth
  3. How to turn capital into a wage for life.

Finding our pensions is a job in itself, hopefully the pension dashboard will help but for now it’s a hard slog. We have to log on through the Government gateway to see our rights to a state pension and collect an armful of paperwork from our workplace and private pensions. We need a pension-finder service.

The next job is to work out what these pensions are worth and how to organise our finances around them. For most of us, the idea of managing several small pots to provide a wage in retirement sounds too difficult. We’ll naturally want to bring our pots into one. But which one?

There are two ways of looking at this very tricky decision. We can look at what has happened in the past and go with the pension provider who’s given us the best deal in the past. Or we can look at what’s available going forward and move our money into what we think is the best deal going forward. We might go for a half-way house and use one of our existing pension providers going forward.

But how do we choose which one?

Where AgeWage comes in!

Bearing in mind how many of us reach 55 each year (over half a million) and how many pots we have (50m abandoned pots by 2050 according to the DWP),  it’s surprising that more attention isn’t being paid to this problem.

Only 1 in 10 of us has taken financial advice and with adviser numbers falling , there’s not enough financial advice to go round. It’s not just capacity that’s the problem. Unless you’ve got £250,000 of investable wealth, most advisers won’t want to take you on.

So where do you go for help in working out what’s happened in the past and what you should do in the future.

The answer’s AgeWage.

What AgeWage does (if you ask it to) is look at the data your provider has on your pension and work out if you’ve had value for money from your contributions. We’ll be able to give you accurate answers to questions like

  • How much more will I get out than I put in?
  • What rate of return have I had on my contributions?
  • What have I paid for pension management?
  • What have I got by way of value for money?

Most importantly we’ll be able to answer all of these questions using numbers, not lots of numbers, but single numbers which aren’t based on guesses but on fact.We

While what happens in the future is a matter of fact, what happens in the future is a matter of speculation.

While we can milk the data from the past to see whether the value and costs of investment work when you’re spending your money, there are other factors that enter into the equation. We expect our money paid to us at the swipe of our phone and you won’t get that kind of service from most pension providers. We want information on how much we can spend and when our money’s going to run out. We want help in planning for events we’re worried about, like losing our marbles. Most of all we want to keep things simple.

If you want to know more about AgeWage – drop me a line at . I’ll be happy to help!agewage vfm







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