Provider’s mixed messaging on CETVs


A troop of CEOs have paraded accross New Model Adviser in the past week, all claiming that banning contingent charging would stop advisers working in the mass market.

Quilter’s Andy Thompson speaks out here

Simply Biz’ Matt Timmins speaks out here

SJP’s Andrew Croft speaks out here

More from Quilter and Royal London here

Meanwhile Prudential research suggests that half of financial advisers report that they would do less DB transfer business if contingent charging was banned.

Considering the FCA’s contention that around half of the advice given on DB transfers is flawed and that a high proportion of the recommendations to transfer should not have happened, the FCA must feel satisfied that their proposals are on the money.

Who benefits from transfers?

While the CEOs have been speaking to IFAs via the trade press, explaining how supportive they are of IFAs spreading the transfer love, they have also been speaking to analysts about the drop in new business from the slowdown in CETV transfers they’ve been receiving this year. It is – it seems – something that was not expected to happen.

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As we all know, the reason the flow of CETVs is slowing is because  professional indemnity insurers are restricting the numbers of CETVs , forcing IFAs to ration advice. Did the retail divisions of these providers ever think the levels of CETVs they received sustainable?

The ban on contingent charging will simply restrict the numbers of CETVs recommended, it would have little to no impact on the broadening of ongoing financial planning. The vast majority of CETV money is now with insurers or in DFMs and generating ongoing fees which benefit insurers, DFMs and financial advisers but were never designed for the mass market clients  that SJP, Royal London, Quilter and SimplyBiz believe would be excluded.

  The FCA and workplace pension schemes (WPS)

In a bizarre twist of logic, one independent adviser is now accusing workplace pension schemes from excluding them using them.

From the conversation I am reading, the problem is around the FCA’s insistence that these cheaper products are considered in IFA’s recommendations and that IFAs will have to explain why they have not chosen what on the face of it look cheaper solutions to the ongoing management of money. This is reckoned an irrelevance by another IFA

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Where exactly the customer stands in all this is unclear,

Workplace schemes are hidden

Another adviser rightly points out that at the time of BSPS’ Time to Choose, steelworkers – who by and large were in WPS were not offered them.

He is right.  I wrote about this at the time and you can see from what I wrote then that it wasn’t just the IFAs who were avoiding WPS, the insurers and the employers were scared silly of their products being used too!  Please read the article below.

Has Tata the courage of its conviction? (the workplace pension that dare not speak its name)

At the time – Michelle Cracknell called out the scandal of the unused Tata and GreyBull workplace pensions. It has taken nearly two years for the FCA to swing round its guns but now it has.

The questions that need to be answered by these CEOs

  1. Why did you take CETVs onto your platforms without question?
  2. Why did you not promote WPS alternatives – when you had them?
  3. Are you reviewing the suitability of your  products recommended?
  4. Will you consider restricting charges on those products to WPS default levels?

If you cannot answer these questions, then I wonder whether your commitment to mass-market advice is anything more than a sham. Contingent charging looks like backdoor commission and your arguments for “broader advice” sound like volume and margin preservation to me.

Margins and volumes preserved by vulnerable customers who should not be in your products.

I am unconvinced that in a low return environment where the yield on an annuity is around 2.5% nominal, charges of 2.0% pa + on drawdown (let alone accumulation) can ever be in the client’s best interest. But what I see reported to me by those who have transferred and the IFAs and solicitors who are trying to sort out the problems of 2016-18 is that such charges are common.

It would be better if – instead of arguing for more of the same – insurers, SIPP managers and IFA compliance services faced up to the reality of the situation which is that billions of pounds is in the wrong kind of policies, in the wrong kind of funds with the wrong kind of fees.

Posted in advice gap, age wage, pensions | 4 Comments

Lipstick on a pig – the sorry state of “robo-advice”


On 11th  and 17th of September, those turning up for the FT Adviser Financial Advice Forum in London and Birmingham respectively, will be entertained by a panel session.

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The conference promised to bring  the views of industry and regulatory experts on the latest challenges facing advisers, and how they can be overcome.

I had been invited and accepted because I do challenge the advisory community to raise its game.

I’m cross because I was originally on the “interactive panel” and appear to have been dropped (though I have not been informed of this by the FT).

I’m sad because this confirms what I have long suspected, that Robo-advice is being treated as nothing more than lipstick on the wealth management pig.

If you look at the three propositions on offer from WealthSimple, MoneyFarm and Holland Hann & Willis, you will find the same core model. Technology front end- wealth management back end.

All that technology is being used for – is to reduce the cost of acquisition of other people’s money. And the money that is being acquired forms part of the current wealth pool that is all that IFAs seem capable of feeding from.

Disruptors excluded

The FT seem to have excluded me from this cosy threesome because I might just point this out. They are right to do so, though why they ever thought I wouldn’t challenge the robo-advisory lip-stickery I do not know.

Every iteration of the Nutmeg model revolves around funding from a pool of assets attracted by an expensive UX (user experience for the uninitiated). But no matter how bright the lipstick, there is still a big fat wealth-management pig sitting behind – ready to chew up the twenty and fifty pound notes.

Meanwhile, the genuine innovators, whose models reach out beyond a replication of Nutmeg  are nowhere to be seen.

AgeWage – which was originally been invited has been dropped – no reason given

Pension Bee – who have produced the first genuine mass-market SIPP – are nowhere to be seen. Open Money – doing much the same.

My FutureNow -which only this week cut an important deal with L&G to be an independent aggregator and Zippen which should follow, are outside the tent.

And there are many more in incubation..

Financial advisors – cover your ears

Robo-advisers are not embracing new technologies to extend the scope of their advice, they are doing so to become more competitive in the existing wealth pool.

Meanwhile for the 94% of us who are not paying for advice, these new players are an irrelevance.

Organisations like the four mentioned above, who are looking to reach out to the millions of  savers who do not currently have access to the support they need to make complicated decisions are excluded.

I can only conclude that the tent is closed to all but the regulated advisers and that includes the 94% of us who are no closer to getting advice than we were “pre-Nutmeg”.

Financial advisers – (cover your ears) –  you don’t really matter to most of the UK population and that isn’t going to change so long as you zip up your tent.

Opening up the tent

Eventually, the FCA, MAPS and tPR will find a way to broaden the scope of advice beyond those with the wealth to pay for it.

But that day is some way off.

The  innovators are excluded from the FT Financial Advice Forum  

But it is only a matter of time before the tent is opened up. I will keep up the pressure and so will those who genuinely want open pensions and open dashboards providing ordinary people with the information they need to take decisions.

And AgeWage will never exclude financial advisers from joining in our work.



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

It’s not pensions that are scary – it’s “search”!

Every day, thousands of people worry where their pensions, how much they’re worth and what they can do to get their money back. Pensions are scary but they are not as scary as what you find when you search the web! The story Iona’s quoted on appeared on Yahoo Finance, but we don’t have to look far to find that Yahoo finance are promoting “advertorial” that isn’t much better.


Before you think that I’m knocking search, I should point out that this blog would be a pretty boring place without google and yahoo that allow me access to an understanding of what to do (as well as what not to do).


This of course is both the value and problem of search.

Who’s googling pensions?

I’ll lay a pound to a dollar (not much of a bet these days), that a high proportion of those googling “pensions” are finding their way to the kind of dubious propositions the FCA are so worrying about. That’s because those with the wrong intentions are very good at SEO (search engine optimisation). Googling final salary schemes does not take you to a website that tells you how final salary pensions schemes work, it takes you here

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Four ads designed to help you get out of final salary pensions.

And the people who are searching are almost certainly going to end up with the wrong kind of advice , charged at the wrong end of the spectrum in a contingent way.

This is where the problem starts and where the FCA should be focussing its efforts (if it wants to reduce the number of people transferring when it thinks they shouldn’t.

This is not cold calling

The traditional boiler-room scam, initiated by a cold-call is dead. It died before the cold-calling ban came into effect. Most bad advice originates from “search” not a cold-call.

If you go to the websites behind the ads, there is nothing actionable to be found. Lead generation for IFAs is perfectly legal.

Darren Reynolds generated a good proportion of his leads – not from chicken dinners – but from the Money Advice Service’s search an IFA facility which disastrously through up Active Wealth Management if you input your location as Port Talbot.

MAS were not actively promoting scamming – but they promoted scamming nonetheless and the FCA can no more prosecute Google or Yahoo than they can MAPS.

This is OUR responsibility

Some scammers may read these blogs, but for the most part they’re read by trustees, employers and other fiduciaries who feel they have either a duty of care or a regulatory responsibility to protect members.

Let me be straight with you.   YOU – ME – WE’RE FAILING

We should be taking personal culpability that people are googling Final salary pensions to get out of them, that they’re finding mini-bonds when looking for income.

We should not be leaving it to our staff/members/policyholders to find complex solutions to their financial futures using web-search, we should be making it perfectly clear what their next steps should be and they should not include finding a pig in a poke on the web.

The pensions map is like the Straits of Hormuz, people, like oil tankers , are forced into a tight situation when they come up to retirement, and like fully laden tankers- they are full of money and at their most vulnerable.

We should not be relying on more legislation to stop the scammers, we should be taking personal responsibility.

Over the course of this week , 23 of Britain’s largest employers and/or reps of their pension schemes visited WeWork More Place and discussed how to help people who fall into these categories.

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the things people want from their pension pots

We are about providing simple things for employers/providers/fiduciaries to do when you meet people with these wants.

Ruston Smith is helping people find good IFAS

AgeWage is helping people find good annuities

Quietroom is helping  people find the right words

We are all trying to help the majority of people who are totally lost and in danger of asking google or yahoo for “next steps”.

We are running two more of these events at the end of the month. If you have people who are asking for things from their pension pots, you can help them.

Simply sign up here


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The first 100 people to find this blog




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Absolutely true (as I visited the Royal Mail)


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How the Royal Mail pension schemes are run

Whether it be through its Final Salary Scheme (RMPP), the interim Cash Balance arrangement or its DC trust, Royal Mail Pension Trustees have consistently over-delivered to their organisation and the members of the various Royal Mail pension schemes.

This has been overlooked but is rather important.

Under the excellent investment management of Ian McKnight, the funding costs of the promises made to postal workers have been stabilised and look in future to be negative (at times plans have been in surplus with attendant savings to the ultimate sponsors (including the Government).

Ian has worked with Ben Piggott, who is in charge of the DC arrangements looking at innovative solutions to the shortcomings of insured DC defaults, though these have been stymied by permitted links regulations (liquidity based) , hopefully they will bear fruit in the investment strategy of the imminent CDC plan – which McKnight expects to be “punchy”.

Further innovation comes from Tim Spriddell, a consultant to the Trustees who is so embedded in Royal Mail communications that I can speak of him as the architect of the member’s communications. I love the RMDCP video- made with Quietroom

With Mark Rugman and Michael Mayall providing the link to Royal Mail’s member benefit administration, Richard Law-Deeks can be very proud of the team of whom he is chief executive.

The Royal Mail’s pension executive is a fine example of how pensions should be run – and I cannot say that for all the executives I have visited recently.


How the Royal Mail pension schemes are governed

The management of the Royal Mail pension schemes is down to the executive, but strategic decisions and oversight is up to the Trustees.

You can read about the Trustees of the DB plan here. Joanne Matthews, Mark Ashworth and others represent the  independent ones and Phil Browne and others from the Royal Mail fill the rest of the places other than Graeme Cunningham and Lionel Sampson of Unite and CWU respectively. Though this plan is no longer accruing new benefits, it underpins the pensions of most postal workers and is of vital importance. The executive and trustees need to work properly together, I get the impression they do.

The (new) Chair of the Trustees of the DC plan (RMDCP) is Venetia Trayhurn.  

Victoria spent time at the Financial Ombudsman Service and we had a good conversation about protecting member’s interests when she came to a recent AgeWage workshop. She works as a professional trustee for LawDeb but gave up her time to come to a workshop we gave this week about helping members with their difficult retirement choices.

Other trustees include Jon Millidge, formerly the company HRD and instrumental in negotiating the proposed CDC plan with Terry Pullinger and the CWU. Though the DC plan is likely to be superseded by the CDC arrangement , you can see by the attention paid to its communication, that it is anything but a poor relation.


What does this mean for members?

Postal workers at Royal Mail are properly pensioned and – provided the Government don’t renege on promises, will continue to be offered build up of a  wage for life pension into the future.

My recent visit to their Pension’s Office in Ironmonger Lane in the City of London and meetings with their trustees, teaches me that this is an organistion where sponsor, trustees and pensions executive are working together with the member’s interests at heart.

I love writing this blog, because it lightens my heart that there are places in Britain where pensions excellence persists, and Royal Mail is one of those places.

They are setting the gold standard against which others can be judged and we should be grateful that they do.

What this means for the members of the various Royal Mail pension arrangements, is they can work with the comfort that when they stop working, their pensions will last as long as they do.

Oh and don’t confuse the Royal and Daily Mail!

Posted in CDC, pensions, Royal Mail | Leave a comment

Help for Trustees, Sponsors and Members with AVC plans

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I’ve divided this blog into two- the first bit’s for the people who have charge of defined benefit schemes and relates to the DC savings plans that members can use to supplement their pensions (AVCs).

The second bit’s for the members, but it will probably be helpful for those in charge – who may be members – and may have the job of explaining these complicated things in simple terms.

I recently had to make decisions on the AVCs I paid, and much of this relates to my personal experiences. I was lucky, I had plenty of help.

I am not a tax expert and I don’t know my way around all the arcane rules that govern AVCs ( the older the more complicated) but there are people who do , who are there to help you and this article is here to help those people who might otherwise google – stick to the true and trusted sources – your scheme administrators, your trustees and the Government helplines that really are impartial/

This bit’s for trustees and DB sponsors

Back in the day when corporate benefits structures were about defined benefit pension schemes, additional voluntary contributions were considered very important.

To those who have paid them, they still are.

But the focus has shifted and nowadays the AVC schemes set up in the last quarter of last century are consigned to the legacy cupboard.

Trustees have got better things to worry about, like keeping tPR and the sponsor happy.

But the money in these AVC schemes with the likes of Prudential, Standard Life, Aegon, Aviva and the Equitable Life is still the trustee’s responsibility, they own the policies not the members and they have a fiduciary duty to ensure these schemes are giving value for money. Increasingly the DWP – through tPR – is looking at value for money as the primary concern of trustees looking after DC benefits.

In its recent investigation of transparency, the DWP’s Work and Pensions Committee called for a definition of value for money that could be applied across all DC pension pots. We have given a lot of thought to what that definition should be.

What “value for money” means to members

The two things that concern someone saving into a DC pot (AVC or otherwise) are money-in and money-out. Money goes into the pots by way of regular and special contributions, in the case of AVCs from payroll. Money comes out of AVCs into annuities, as cash (sometimes tax-free) or into personal pensions which are used for drawdown.

Value for Money is a measure of what happens between “in and out” and is best measured as the internal rate of return achieved uniquely by each contributor. Each contribution history is unique as is the output – the net asset value – or in the case of with-profits investments, the plan value.

But simply giving a member his or her internal rate of return (IRR) is meaningless unless it is compared to a benchmark. If benchmarked, the IRR can show whether the AVC has done better or worse than average, what the value for money has been.

Creating the benchmark and a VFM score

Until now, no organisation has created a meaningful benchmark, against which to measure the internal rate of return of AVCs for VFM purposes.

Which is where AgeWage comes in. We have co-created a benchmark with Morningstar , the rating agency. We have used indices going back to 1997 and fund-baskets before then, to create a daily price track representing the fluctuations of a typical DC pension fund going back to 1980. Investing a contribution history into this price track creates an alternative IRR, being what the average AVC saver would have got.

We are able to calibrate the difference between “achieved and average” to create a score out of 100 – with 100 being outstanding and 0 being dire.

Better still, the universe of data we have already built up makes this score comparable to the VFM members may have got from other pension contributions, for instance into workplace or stakeholder pensions, even DC pensions in payment.

What AgeWage scores mean to trustees

Trustees running DC schemes (which we take to include DC AVC plans), have a fiduciary duty to get value for their members contributions (money)

Their care on this matter is likely to be scrutinised by tPR. 

Trustees are vulnerable to criticism and even censure – if they have no regard to member’s voluntary contributions.

But more important than “compliance” with regulation, we believe that the reputation of trustees as upholding member’s interests is of critical importance, especially where those trustees are under pressure to add value

This bit’s for members

I’m surprised by how little attention is paid to helping members of DB plans with their AVC pot. I’m quoting here from a guide given us by the Prudential.

Currently, from age 55, you have a number of options to choose from when you decide to take the money in your AVC pot. You may need to move your AVC pot to another pension to access some of these options or to access them when you prefer.

  • Take flexible cash or incomeYou can do this by moving your money into a drawdown plan. In most cases you can take up to 25% of your money tax-free, you’ll need to do this at the start. You can then dip in and out when you like or take a regular income. This may be subject to income tax.

  • Get a guaranteed income for life
    You can buy an annuity – it pays you an income (a bit like a salary) and is guaranteed for life. These payments may be subject to income tax. In most cases you can take 25% of the money in cash, tax-free. You’ll need to do this at the start and you need to take the rest as income.

  • Cash in your pot all at once
    You can take your AVC pot as a single lump sum. Normally the first 25% is tax-free but the rest may be subject to income tax.

  • Take your cash in stages
    You can leave the money in your AVC pot and take out cash lump sums whenever you need to – until it’s all gone or you decide to do something else. You decide when and how much to take out. Every time you take money from your AVC pot, the first 25% is usually tax-free and the rest may be subject to income tax.

  • Leave your pot where it is
    You don’t normally have to start taking money from your pot when you turn 55. It’s not a deadline to act.

  • Take more than one optionYou don’t have to choose one option – you can take a combination of some or all of them over time.

Now tax is the hard bit. You can of course take tax free cash from your defined benefit plan – but this means you have to swap pension for cash- like you do when you take a pension transfer. The exchange rate between cash and pension is down to what the trustees (advised by their actuaries) choose to offer you. Some may be generous and only charge you a pound of lifetime income to get £30 cash, some can be stingy and charge you a pound of lifetime pension to get £15 cash. It’s all down to what actuaries call commutation factors.

If you have a really generous set of trustees, they will let you use your AVC pot to fund your tax free cash meaning you don’t have to “commute” cash for pension. This is almost always a good thing to do.

The “almost” bit refers to AVCs which can be exchanged for an annuity at a preferential rate – what is known as a “guaranteed annuity rate” or GAR. If you see any mention of such things in your AVC literature you should check out what the GAR deal is with your pension manager or with the insurance company who offers the AVC (there should be contact details on the communication.

So what about this 25% tax-free cash option?

If you can’t swap your AVCs for tax free cash, (because the scheme rules don’t) allow, you can usually take your AVCs as a lump sum or transfer to a personal pension. In either case you should be able to get a quarter of your AVCs as tax free cash.

But you need to check with your scheme to make sure that you don’t fall foul of one of many very complicated bits of tax legislation that surrounds these old style pensions.

Where can I get help (that doesn’t cost an arm and a leg)

I don’t mean to sound biased but I strongly suggest that if you have any doubts about tax, you speak first to your scheme and see if they have advisers who can help you. Most do and most will allow you to understand the complexities of the situation using advice that is paid for – not by you – but by the trustees (and ultimately by your employer).

You can also get help from the Pensions Advisory Service that is now part of the Money and Pensions Service (MAPS).

Their  pension helplines are open from 9am to 5pm, Monday to Friday.

They are available on webchat from 9am to 6:20pm.

Theye are closed on public holidays.

Pensions Helpline: 0800 011 3797
Overseas helpline: +44207 932 5780

Helpline for Self Employed: 0345 602 7021

Posted in pensions | 5 Comments

Navigating pension’s Straits of Hormuz

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The contested space between the Persian Gulf and the Gulf of Oman

We met last night in a crowded room in Moorgate WeWork. We were an eclectic mix of pensions directors, chairs of trustees , annuity experts Retirement Line,  Ruston Smith, Vincent Franklin and me.

You can see the slides here

Unfortunately slideshare won’t show the embedded video from Quietroom which you can watch below. I know lots of us have seen the horse in the orchard before but it’s worth reminding ourselves how simple the choice architecture can be made.

The premise of the evening was that moving from the controlled world of workplace pensions to what comes in retirement is the financial equivalent of passing through the Straits of Hormuz

Check out the map at the top of the blog and see where you think the pensions equivalent of the Straits of Hormuz are on the Quietroom/DGP map of the pension world.

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The contested space between the workplace and retirement


Vincent Franklin’s analogy brought to mind brigands from Somalia and state sponsored raids from Iraq. It is easy to draw parallels to the ravages on people’s pension pots from scammers and the Treasury

Perhaps the most important point of the evening was made by Boots’ Julie Richards who pointed out that while the £20,000 saved by one of her staff might not sound much to pensions professionals, it was possibly the most significant savings achievement to that person.

Denying that person the right to that money on their terms was an insult to that achievement. But not helping them understand the perils of being scammed by brigands or losing out to the taxman, a failure in personnel management.

Treating all pension pots as equally important

Julie’s comment set the tone for the evening. Whether you have £20,000 or £2m in your pension pot, that money is important to you and deserves the same attention from pensions professionals. We cannot go on supporting the wealthy and ignoring the savings of those with smaller pots.

The meeting focussed on the needs of four groups of savers whose plans could be characterised by one of these statements

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For those people who wanted access to an IFA, help was at hand as Ruston Smith talked us through an important initiative he is pioneering at Tesco where IFAs he introduces to his staff will be required to abide by a code of conduct and be subject to due diligence by a significant third party. You can see Ruston’s ideas embedded in the presentation above.

For those who want to wait and see, we discussed the support that can be offered from MAPS and particularly Pensions Wise but also from the pensions departments of the leading companies around the table.

For those wishing to do their own drawdown, we discussed the investment pathways due to be implemented next spring as part of the FCA’s Retirement Outcome Review

While for those people wishing to buy an annuity, a range of options were outlined by Retirement Line, including the deferral of decisions using Fixed Annuities.

The point was that this was not about wealth at work, it was about everyone.

We’re all in the same boat

I came away from the presentation inspired by the enthusiasm of organisations as divers as Tescos, Royal Mail, ITV, Boots and BT. All professed to having different ways of helping their staff through the perils faced as they chose retirement options but all were in the same boat.

We can surely do more to help our staff, whether we are mega -employers like these – or we run one of the million SMEs (like Quietroom , Retirement Line and AgeWage) that have staged auto-enrolment.

The role of the employer in outlining the options available to staff in a clear and concise way is what employers can do. They may not feel up to doing the guidance themselves but they need to know the resource that is to hand.

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You can come to future workshops

If you have staff who are coming up to retirement and you’d like to find out how you can help them navigate the pension straits of Hormuz then there are still spaces available on 28th and 29th August. There’s one space for tonight (Wednesday 14th August).

You can sign up to one of these days using this invite

Invite to AgeWage summer workshops

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

Convince or collapse – the options for small DB schemes in the next decade.


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We stand on the cusp of the third decade of the 21st century. That decade is likely to see small DB schemes collapse into consolidators or stand firm with renewed conviction. I wonder if I will still be writing blogs in the summer of 2029 to review this statement, I suspect that most current trustees of DB plans will not be around to read them – if I am.

Yesterday I paid my first visit to Vestry House in Laurence Poutney Hill, the offices of Disruptive Capital and its nascent Pension SuperFund. Whether this DB consolidator succeeds or fails is itself a matter of conviction, it looks as if Edmund Truell has dug in his heels and it will be hard to dislodge him. But if he fails, there are others – such as Laurence Churchill’s Clara, that will step up to the plate.

The Treasury are giving support to the insurers who fall under their regulation (FCA and PRA).

The DWP have decided that consolidation will happen their way and though the Pensions Regulator is dragging its feet, the pensions industry generally expect the non-insured consolidators to get licensed by the end of this year

Two ugly sisters

TPR has adopted an attitude of tending small schemes through a fast track process which is the pensions equivalent of the Liverpool care pathway. A gentle decline into insurance – “go gently into that good night”. This is not pleasing the consolidators who wish they’d listen to their paymasters at the DWP.

Insurance companies have lobbied hard against the DB consolidators, claiming they are simply exploiting loopholes in regulation to underwrite buy-outs without the requirements of Solvency II. They have the Treasury’s support.

In the face of considerable opposition, the Pensions Superfund has hit back with a report commissioned from Redington proving against a number of (to me) incomprehensible measures, that the asset allocation of consolidators (modelled on the PPF) provides better outcomes in all weathers than those of insurance lifeboat funds.

This is not a fight that I want to get into, not least because of the twitter storm going on after I pointed out the availability of life annuities in the Times. Redington’s analytics have always been suffeciently arcane to prove any point, insurers are hardly charities;- who is there to love?

Insurers and consolidators are the two ugly sisters. They will be going to the ball long after Cinders has had her pumpkin night out.

Faith in small schemes waivers

Small DB schemes have to face a harsh choice. Either they go back to their sponsors and members and argue for their continued existence – with conviction- or they collapse into consolidators. I don’t see the Liverpool pathway as much of an option – though it will keep diverse pension administrators, accountants, lawyers, fund salesmen, platforms and most of all professional trustees in a job at least till the summer of 2029.

But the job of the employers who sponsor these schemes is not to act as surrogates to the Ugly Sisters, but to produce things, or do charitable things or to provide services and the cashflow calls of the pension schemes are unsustainable, the blight on business strategy unmanageable, the impact on productivity dismal.

We can’t let small DB schemes blight corporate and charitable strategy, these schemes must either shape up or shape out. This is not Edmund Truell talking – it’s me – and I work for an actuarial consultancy that is supported by small schemes.

The residual value of small schemes

Small DB schemes can and do add value to companies, but not when they put themselves on the pathway, then they only act as a succubus.

My point is illustrated by this graph – devised by my friend Derek Benstead so that even I could explain the value of keeping a pension scheme open

life cycle open

There is no great benefit in closing your own scheme, you might as well collapse it into whatever the ugly sisters are offering. You’ll pay a price for off-loading it, but it’s far from clear to me that insurance companies are worth the extra price that solvency II creates, they are the non-profit option and at the non-insured consolidators are holding out some hope of with-profits increments if they are proved right.

Your choice as a Trustee is probably dictated by the pockets of your sponsors, they will in the next ten years be looking at what the ugly sisters have to offer and they will ultimately be making the call.

The value of small schemes is int the conviction of their trustees and the aspiration they can create with sponsors. I can’t see schemes re-opening, I can see schemes resisting closure and I see those schemes that struggle on doing so on a radically more effecient basis.

The proper management of open schemes will increasingly involve modern systems of record keeping – the adoption of digital communication with members, low cost asset management using platforms to drive down costs and e-payment of pensioners.  Trustees who do not employ efficiencies available through new technologies will perish.

The value of small schemes lies in their capacity to adapt to tomorrow’s world, while preserving yesterday’s promises.

How many DB schemes will survive?

I doubt that more than 1000 of the 7000 remaining DB schemes in this country will be around for me to blog about in 10 years time.

I believe that consolidators and insurers – the two ugly sisters of the pensions world, will convince sponsors who remain unconvinced by their schemes, to pack it in. The ongoing costs of keeping schemes open will ensure this is the case. The PPF will remain the lifeboat – the third ugly sister – though she waits in the wings.

This is a harsh prediction and I hope I am proved wrong. The prediction is a challenge for trustees (especially independent trustees). It is also a challenge for consultancies and other professional firms.

We are approaching the third decade of the 21st century and it is a decade that makes or breaks DB schemes. The ugly sisters have already arrived at the ball, will Cinders?



Posted in CDC, dc pensions, de-risking, defined ambition, defined aspiration, pensions | Tagged , , , , , | 2 Comments

Why the door’s slammed shut on open pensions.

Screenshot 2019-08-09 at 06.35.20.png

During the week, AgeWage was invited to compete in the  Nesta Open Up Challenge. Nesta is funded by the UK lottery – they are an agency of change sponsored by the likes of you and me;

As any entrepreneurial start-up would, we were excited by the prospect of a £1.5m prize fund to unlock the power of open banking for UK consumers. It’s hard not to want to be involved with an organisation with this claim

Nesta is an innovation foundation. For us, innovation means turning bold ideas into reality. It also means changing lives for the better

My aim for AgeWage is to provide all of Britain’s pension savers with a simple number telling them how their pension has done – in terms of value for the money  contributed.

So when I read that the eligibility for this award focusses on organisations that

Must target a total potential market of at least hundreds of thousands, ideally millions of consumers.

I felt in the right ball park.

But then the bad news; organisations that enter

Must use the Open Banking Implementation Entity (“OBIE”) API endpoints and conform to the OBIE Read/Write standards (“the Standards”) to programmatically access digital bank account data and/or payments functionality, even if in practice the Product does so indirectly by using the AISP or PISP capability of an authorised Technology Service Provider (“TSP’). Evidence of usage of OBIE API endpoints and conformance to the Standards may be sought by the judges as a condition of acceptance onto Open Up 2020.

and that was when our application ended.

Open pensions are as far away as ever

Our summer at AgeWage has been spent helping our investors apply for and receive the data they need to get AgeWage to provide them scores.

We struggle with bulk uploads of data from insurers and third party administrators that never arrive.

We are told we cannot process data because

the data provider

  • won’t accept e-signatures
  • won’t accept emailed letters of authority
  • won’t accept AgeWage as a data processor
  • won’t identify a customer without a policy number

I could go on.

We cannot operate effeciently unless we can exchange data in a free way. But there is no freeway for data requests because we do not have open pensions.

The idea of a free flow of information between customer and data provider is not entertained; despite the pensions dashboard being supposedly delivered this year.

Using scams as an excuse is not good enough

It is true that there are scammers who would like to steal money – after stealing data and pensions administrators, like banking administrators are right to be vigilant. But that does not mean that pension providers should put the up the shutters against innovation.

The data protection act of 2017 gave individuals the right to have data held by others about them , returned on request in digitally useable format.

That does not mean in a PDF or embedded into a word document. It means in a format where the data can be extracted and used for purposes the data owner has in mind.

Which might just include finding out how their pension has done compared to the average pension – by way of an AgeWage score.

Scammers are not to be used as an excuse for providing this information.

The sooner pension providers  think of open pensions the better

Earlier in the year I made a fuss about the pension dashboard and the exclusivity being given to Origo in the design of its functionality. I wanted (and want) pension information to be freely available on request through the use of the same data standards that have made open banking a reality.

There are of course limits to the success of open banking, but we are living with the happy results. I get a text message every day of money in and out of my account – on my phone – my watch – my laptop – where I want it.

My money is now more accessible, more manageable and better governed than ever before. That’s because there is absolute transparency between First Direct’s systems and what I see at 6 am every morning.

This kind of transparency was achieved because of the determination of the CMA to force banks to out customer data using secure protocols called the CMA 9.

It is now expected of anyone wanting to compete for money from Nesta, that they subscribe to these standards.

I cannot subscribe to these standards , because – much as I would like to adopt them – there is no counter party. And there is no aspiration amongst pension people (other than with a few Pen-techs like Pension Bee), to see this change.

Until there is this aspiration, the pensions dashboard will continue to dawdle along at an unsatisfactory pace and the public will become increasingly disillusioned.

The old way of doing pensions, where you worked a lifetime and then got told what you were getting at retirement is gone. That was the world of SERPS and DB pensions

Instead we have a world where we have to take decisions on what we’ve got, which – by the time we get to the end of our working lives, will include many pension pots.  People need to get the information they need to take decisions for the future and organise themselves. They simply don’t want 400 sheets of paper – they want a single sheet of numbers – so they can make sense of their information.

Lengthy wake up packs are precisely what people don’t want. Wake up packs present information in the way we want it digested, but it gives people financial indigestion.

We have to move to clear digestible financial information available at the swipe of a phone , using proper security protocols. We must move to open pensions and the organisations that must make this happen start with Government and work right down to AgeWage.

This starts with Government and ends with AgeWage

Whether the energy for change starts at DWP, BEIS or HMT – we need a new commitment to open pensions for currently the door is slammed shut.

We need the pensions dashboard released from MAPS and put in the hands of the technology entrepreneurs that disrupted banking to give us open banking. Those entrepreneurs are all around us, they are waiting to work on pensions given half a chance.

We need the ABI and its technology partner Origo- to open itself to change and not seek to colonise the infrastructure of the pensions dashboard.

We need insurers, third party administrators and the in-house teams that manage occupational pensions to work towards a solution that applications like AgeWage can adopt.

So that we can hold our heads up high and say that pensions is no longer the technology laggard, but fully participating in challenges that Nesta and others set us!

Posted in advice gap, age wage, Pension Freedoms, pensions, Start ups, Technology | Tagged , , , , , , , , | Leave a comment

When advice sits behind a paywall.,,,


One of the many pleasures of it being summer is that I have time to contribute to newspapers. I searched myself on the Times website and found out I’ve been contributing to their articles at a rate of one a month for the last year. So maybe I’m selling myself short – perhaps Im a “regular contributor”

Though obviously no rival to (ahem) John Ralfe!

Advice behind a paywall.

Yesterday I was able to comment in the Times on an FCA press release and was quoted on page 12. If you have a paper copy, my comments sit beneath pictures of Mick Jagger and Keith Richards.

If you don’t  I’m afraid, that like financial advice, my  digital comments sit behind a paywall!

Five million pension savers are in danger of losing their savings to scams that guarantee high returns, regulators warn.

The Financial Conduct Authority (FCA) and the Pensions Regulator say that savers have been too willing to be taken in by the promise of exotic investments and too many discuss their pensions with unsolicited callers, even though cold-calling about pensions has been illegal since January.

Their findings in a report today have been criticised by pensions experts who believe that the FCA has been too timid to protect savers since the introduction of freedoms in 2015 that let people access their pension pots from the age of 55 without having to buy an annuity.

“The government is scared of scammers but who opened the door to the chicken run?” asked Henry Tapper, the founder of AgeWage, a pensions rating system.

“When George Osborne [then the chancellor] promised us no one would need to buy an annuity again, he invited every fox in the land to a lifetime of chicken dinners.

“This research should have been conducted before we got pension freedoms, not four years after.”

It sounds like the FCA are getting fed up with us behaving like muppets , but why should we be anything but confused. The FCA don’t make it easy for us to know the difference between advice, guidance and scams. When I perused the notes to editors on the press release I discovered I could still contact TPAS

6. The Pensions Advisory Service provides free independent and impartial information and guidance. 

and better still I can get free independent advice from Pensions Wise

7. If people aged 50 or over require free independent advice, they can contact the government-backed Pension Wise service. To book a free appointment, visit

But we can’t get free independent advice from Pension Wise, unless it’s to go and see an independent financial adviser (who aren’t free). TPAS is now subsumed into the Money and Pension Service which has been neutered of its “Advisory” title.

The Government does not make financial advice – independent or otherwise , available to ordinary people and it should not be suggesting to journalists that it does. If we define advice as “the provision of a definitive course of action” , then advice sits behind a paywall.

paywall big.jpg

Bypassing the paywall

Most people  take financial decisions about their retirement benefits without guidance or advice. Only about 10% of people who are eligible , use Pension Wise and they are the kind of people who will be amenable to taking advice. Estimates vary, but the FCA have told us that only about 6% of us pay for financial advice on an ongoing basis.

This rather clumsy diagram shows how AgeWage research suggests people divide up when taking decisions about their pension savings.

Screenshot 2019-08-04 at 09.05.28

Which type of decision maker are you?

‘Im not asking you to answer this as a pensions professional but as an ordinary member of the public with the prospect of a diminishing income from work.

I am genuinely interested in how people are behaving, as – I know – are the authorities.

One of the reasons is that over the next four weeks, I’m going to be managing some workshops for employers and trustees whose staff and members are having to take difficult choices without much of what the FCA call “choice architecture”.

Just organising the choices people have into a simple diagram, helps me to think about the problem.

Do you agree with the four choices I’ve identified?

Let me explain a little

Most people know enough about pension freedoms to remember that they include “never having to buy an annuity again”. As “buying an annuity” was the only choice most people had, this was a big shift in choice architecture in 2014 when it was announced and remains the first thing most people will think of when they think about their pension savings.

But if not an annuity – what?

The simple answer is that you can choose

  1. to have all your money at once – today – so long as you are 55 or older
  2. to have your money in stages, known as drawdown
  3. to leave your money to your inheritors.

My diagram has a box for two out of three choices of these choices , but it also has a box for annuities. I’ve not put a box there for people who want all their money at once because I think such people are special needs. Most people who take all their money at once are muppets. According to my muppetometer, they are 100% muppet (though there are times when you have to be 100% muppet for tax purposes because the end justifies the means (you just have to have the money.


So why do I include annuities in the choices?

Simple, because loads of people still buy annuities and they do so by searching for annuities on google. Retirement Line – who are annuity brokers – don’t get their inquiries from pension providers but from google.

This is a breakdown of the annuity choices actually made by people in 2018  – as delivered to Frank Field by the FCA

Screenshot 2019-08-05 at 06.38.00

IFAs will occasionally recommend an annuity – but it’s the exception that proves the rule, the vast majority of annuities are purchased through independent brokers like Retirement line and LEBC or the broking arms of the insurance companies – JUST Retirement (Hub), Standard Life, LV= and Sun Life Assurance.

I would be surprised if 1% of IFA inquiries on annuity choices result in the IFA recommending an annuity. The numbers I see show that the vast majority of annuity decisions are taken through annuity brokers who are not financial advisers (LEBC being an exception

What the table does not show is the number of people not visiting Pension Wise, not taking financial advice and not taking a decision that e

The truth is we do not take decisions at retirement in a holistic way. We buy through google, through our pension provider and I am afraid to say, we buy with the help of scammers. At retirement is a mess (and I’m sorry that this section of the blog reflects that).

When advice sits behind a paywall..

The FCA have run out of people to blame. They have blamed financial advisers over transfers.  They have blamed insurers over annuities. They have blamed everyone for non-advised drawdown.

Now the FCA have moved on to blaming the general public for not fighting off the foxes. The foxes are in the chicken coup because George Osborne opened the coup door and invited them in.

I am with Jo Cumbo.

People need access to proper help with their pension choices

What I will be telling the employers and trustees at the AgeWage summer workshops  over the rest of the summer is this.

If employers and trustees want to protect their staff and members from poor at retirement decision making they are going to have to do more than install a token IFA to advise staff.

They are going to have to help not just the people who would not normally take and pay for financial advice, but those who don’t and won’t.

That means signposting not just Pensions Wise, but the other options, the non-advised options available from their  workplace pension providers, annuities available through reputable brokers and especially the option to do nothing.

Doing nothing when the scammers call, is the best option of all,

If you want to follow up on the ideas in this blog…

If you represent an employer or trustee board and are interested in the ideas in this article, join me, Retirement Line and Quietroom at one of our summer seminars, some are sold out but we still have space at the end of the month.

You can find out dates, locations  and availability here.

AgeWage summer seminars.

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

Mr Field – you want a common measure for value for money? I’ve got one!

In the Work and Pension Select Committee’s report on pension transparency, one demand has caught the imagination of the pension community

Screenshot 2019-08-06 at 06.14.48.png

You can read Kim Kaveh’s excellent article here.

Professional Pensions ran the question on its Pension Buzz survey and asked its readership what the single definition should be . This is what I wrote.

“Value is what you get out, Money is what you put in and value for money is what happens in between”

The more you think about it, the truer that simple statement is – and the more universal.

VFM  to most of Britain’s millions of consumers does not lie in the user experience of the product, nor the variety of fund choices, nor in the range of at retirement choices. It lies in the simple equation – “money in v money out”.

Will the pension industry adopt such a transparent approach?

Frank Field said that he thought the pensions industry incapable of adopting a transparent approach to what it does.  Pension Age asked the great and good of our industry if we were, of course the great and good said Field was wrong.

Screenshot 2019-08-06 at 06.22.51.png

To quote David Rowley

The Work and Pensions Committee has called on the government to compel all pension schemes to show how they are providing value for money, as it is ‘unconvinced’ the industry can rise to the challenge itself.

So just what is the big idea?

My idea is very simple; Every person or business saving money for retirement can benchmark its savings history by submitting a data file to me containing their contribution history and the current value of their pension pot (the NAV). In practice, they can delegate authority for me to get this information for them.

I will, with the help of a co-operative pensions administration community, get the information requested in digital format and will provide the following information

  1. The money you have put in
  2. The value you can get out
  3. What’s happened in the middle

The third bit’s the tricky bit, as I have to compare the value of your pot with the theoretical value of your pot if you’d been invested in the average or “benchmark” fund. I and my genius friends have created this benchmark fund with the help of Morningstar who set it up and who maintain it.

What we’ll tell you about what’s happened in the middle is

  1. The rate of return all your contributions have received after charges
  2. The rate of return your contributions would have got if invested in the average fund
  3. The score you have achieved (out of 100) when we compare your Value for Money with everybody else’s.

This is the big idea and this is how you will get the score.

AgeWage evolve 2

The proof of concept

I have now convinced myself and my colleagues on the AgeWage advisory board that we can collect sufficient data to measure this number, thanks to brilliant organisations like Evolve, Royal Bank of Scotland and Scottish Widows for helping with bulk data. Thanks to Royal London for pioneering an easy way to get individuals their VFM score. Thanks to the FCA and DWP and tPR for being supportive and thanks to the other providers who are getting there!

The real proof of concept for me is whether the organisations that need to show consistent value for money metrics, will agree to use our VFM standard.

The Work and Pensions Committee has called on the government to compel all pension schemes to show how they are providing value for money, as it is ‘unconvinced’ the industry can rise to the challenge itself.

Like Frank Field, I think it unlikely that they will adopt a single VFM standard. I think they will continue to consider the feature of the products they have created more important than the outcomes of those products . I think they will continue to score on a Red , Orange and Green basis, the various aspect of the UX they think important while ignoring what ordinary people want to know – the value they’ve got for their money.

People will put up objections that my approach is too simple.

They will say I should be including volatility measures.

They will say that a simple system of scoring will encourage people to take bad decisions.

They will get angry with my scoring system, many already have. That is because it is too simple to meet their complicated needs. As one CIO told me, if pensions were as simple as you make them, I’d be out of a job.


Hard things can be made simple, but they will always prove controversial when they are.

I asked Frank’s question on twitter yesterday

If Scott – or anyone else can find a common measure for value for money which people can understand and find genuinely useful, I am happy to move to it.

However, in the five years I have spent trying to find a common measure to VFM, I have found nothing better than the measure I am using – creating the AgeWage score.

agewage evolve 1

If you would like to be part of my proof of concept and have at least one DC pot I can measure for VFM, drop me an email on It may take me a couple of weeks to get the data, but I promise me and my team will do our best!

The Professional Pensions Buzz survey this week
Posted in advice gap, pensions | Tagged , , , , , , , , | 9 Comments

What WPS is ACTUALLY saying about pension transparency

Frank Field

The headlines are about “rip-off” pension charges, but the WPS Select Committee’s report is a wide-ranging  investigation into the transparency of the pensions industry and not a sensationalist attack on charges. It sets out its stall in the pre-amble.

There should be no cause for the complacency about the pensions industry’s performance on transparency …We are not convinced that any part of the industry scores above half marks on transparency.  Frank Field – Chair of Work and Pensions Select Committee- August 5th 2009

This blog is my understanding of what is being said, including a few comments of mine on the sense of  the paper. I am broadly supportive of WPS in this , though the weight of bureaucracy that would be created by some of the proposals on dashboards and guidance seems unworkable to me.

Workplace Pensions

The first section of the  WPS report focusses on Workplace Pensions and  hones in  on 5 areas where transparency is weak

1, It comes down hard on charging workplace pensions which do not have simple charging structures. Pension Bee’s comments are noted and  NOW is singled out for its flat fee and  its impact on “dormant pots”.

We recommend that DWP review the level and scope of the charge cap, as well as permitted charging structures, in 2020. The review should consider preventing flat fee charging structures being applied to dormant pension pots and revisit measures to proactively consolidate smaller pots.

2. It has no truck with Charlotte Clark’s  argument that getting  value for money from DB schemes is not a consideration for regulators.

Better scrutiny of value for money in defined benefit schemes will either justify or avoid the need for the often difficult decisions being taken about the future of pension schemes.

The FT have publicised figures today showing that despite “cut-throat competition” between asset managers, the amount of money DB schemes are paying for their asset management is not reducing. Whether they are getting more value for the “value add” services like LDI , CDI etc. is not clear. That question according to WPS- needs to be asked.

3. IGC’s are criticised for providing insufficient information for members to understand the value for money they’re getting

In the light of the concerns which are being expressed about the work of some Independent Governance Committees, the FCA must not postpone this (IGC review) any further.

4. To help institutional purchasers of funds,  theW&P Select demand the mandatory adoption of the  CTI templates bequeathed them by the IDWG.

48.We recommend that the Government bring forward legislation to make the disclosure templates mandatory for both defined contribution and defined benefit schemes.

49.We recommend that, to avoid poor quality and untimely data, the disclosure templates are supported by an independent verification process. Compliance should be overseen by the relevant regulators, who should be given any additional powers they might need to tackle non-compliance.

50.We recommend that schemes should be supported to collect additional information if the template does not fully cover their individual scheme needs. This information should be available for scheme members as part of the wider information provided on value for money including information on exit charges and any other costs associated with transfer of their pot. The FCA should explore the creation of a public register of asset managers’ compliance records with reasonable data requests.

5. On value for money, WPS notes

There is no agreed definition of what is meant by value for money in the pensions industry. Although individual schemes will need to vary their value for money goals, without agreed definitions it is not possible to make effective comparisons.

This is critical to the whole transparence debate

We recommend that the Government reviews the initial impact of requiring occupational defined contribution schemes to publish their assessment of value for members in 2020. The review should assess whether or not this requirement leads to better scheme focus on achieving value for money and better communication to scheme members about value for money.


The second part of the report is on investment strategies on which it has relatively little to say. There is the mandatory hat-tip to the Pensions Minister for fine words on impact and infrastructure investing but the only substantive recommendation is to bring IGCs in line with Trustees on mandatory ESG reporting.

We recommend that the FCA should introduce requirements for contract-based schemes, corresponding to those introduced for trust-based schemes, to report on environmental, social and governance factors as proposed in the FCA’s consultation on Independent Governance Committees: extension of remit.

Transparency for individuals

The third and longest section of the report deals with protecting ordinary savers (mainly from themselves- but also from IFAs and scammers (who are often treated as the same).

It rightly focusses on the decisions those with pension pots have to take at retirement.

It starts with what the State can do to help us take decisions

Pensions Dashboard

The report is pretty timid in its ambitions for the Pensions Dashboard

We recommend that by the end of 2019 the Government publish a timetable for the rollout of a non-commercial pensions dashboard. This should include key milestones, such as the date for pension providers to include their data on the pensions dashboard, as well as target timescales for phases beyond the initial launch—for example, longer term plans to enable consumers to make value for money comparisons through the pensions dashboard.

With consent, authorised providers of financial services should be able to include an individual’s pensions dashboard data within their own applications.

90.We recommend that the pensions dashboard should feature retirement income targets to ensure the information is meaningful to its users.

Bearing in mind we have been at this for four years, a rather more authoritative tone would have been welcomed. All the dashboard targets laid out at the start of this year look like being missed and this cannot be blamed on BREXIT.

The W&P Select seemed to have a blindspot here, it is precisely because everything is being driven by the need for a single non-commercial dashboard , that nothing is happening. 

Advice and Guidance

The report is worried that advice and guidance could be a barrier to people taking timely decisions on their own, citing a theoretical example of someone trying to get some money from their pension pot (crystallisation) only to be told they’ll have to wait 5 weeks for a pensions wise appointment before the request could be granted.

But the report has a touching confidence in the ability of Pensions Wise and MAPS to act as a front-line in the war against self-harm and concludes

We recommend that individuals should only be able to opt-out of guidance through an active decision communicated to an impartial body, such as the Money and Pensions Service. This should not be a process which needs to be repeated for every pension pot an individual has.

99.We recommend that for any transaction to be deemed valid, the relevant upfront costs and any further charges should be detailed on the front page of the product and the investor should be required to specifically sign that they are aware of those charges and have agreed to them. This should be the case for exiting a scheme as well as for investment into a new or additional scheme. Investors should also be given a 14-day cooling-off period where transactions can be reversed without detriment to the investor.

Frankly – I cannot see these measures doing much to protect consumers, they look a bureaucratic nightmare. There is a lot more that can be done in this area digitally.

Non-advised, non-guided.

The FCA have provided WPS with a table of the percentages of people taking advice and guidance when trying to get their money back. It makes for interesting reading.

Screenshot 2019-08-05 at 06.38.00

Only when someone wants to buy an annuity , does Pensions Wise show more influence than advisers, but apart from “drawdown” – which is the adviser’s stock in trade”, no spending strategy is well advised or guided. There is a missing box which contains the people who are doing nothing, these people are either very savvy (waiting for something better to come along) or totally bemused.

WPS calls on MAPS to come up with some new ideas for the non-advised, non guided

We recommend that the new Money and Pensions Service should outline in its forthcoming strategy how it will increase usage of Pension Wise.

If they want a hint- they could read again the previous section of the report (the bureaucratic nightmare).

Investment Pathways

Early in the report , WPS extol the good sense of introducing a charge cap on Workplace Pensions. It now makes firm recommendations that the cap should be extended to decumulation of all pension savings

We recommended in our Pensions Freedoms report a 0.75% charge cap on default decumulation pathways. The FCA told us that it would prefer to see if market-consistent tools work and, if those fail, introduce a charge cap. This conversation is a near repeat of those our predecessor Committee had with the FCA about schemes used for automatic enrolment savings, which are now the subject of a charge cap. The FCA would send a simpler message to the industry by setting a charge cap now for investment pathways—rather than issuing vague threats to the industry.

It is good on the need for value for money comparisons between the options in the FCA table above.

113.We recommend that the FCA implement a robust monitoring programme for the effectiveness of the investment pathways, including value for money comparisons with other available products, in partnership with any other DWP monitoring work of the pension freedoms.

It recommends triage – though whether this is the FCA’s job or a DWP legislative requirement (as talked of for opt-out guidance) it isn’t clear.

114.We recommend that the FCA clearly set out how people who have passively built up saving through automatic enrolment will be supported to make and carry out an informed choice from the available decumulation products and not solely directed to drawdown products.

It sees the charge capping of investment pathways offered to those in non-advised drawdown as a trojan horse to all decumulation strategies (echoing the comply and explain language of the recent FCA PS19/21/

115.We recommend that a 0.75% charge cap should be set on decumulation products available through FCA decumulation pathways from the outset.

Independent financial advisers – mis-selling and scams

The conflation of IFAs and mis-selling and scams will annoy IFAs (rightly so). the report barely touches on the mis-selling of pension transfers  but it mentions its concerns about the SIPP solutions employed for BSPS members and grumbles that the availability of the good quality financial advice it notes comes from IFAs is scarce.

Anyone listening to the Wake up to Money article on this report this morning will have heard Chris Ralfe of SJP referring  to his company “like many other  independent financial advisers”. So long as senior representatives of insurance companies continue to regard their sales forces as IFAs, the confusion between types of advice will continue. IFAs , restricted advisers and scammers are not “as one combined”.

Many Independent Financial Advisers provide good value for money for pension customers. However, the number of people paying for good value advice is low. People who are not able to access good advice need guidance and effective protection from pension scams, which can have life changing impacts. Scams not only harm the individual but cause wider damage to the industry by discouraging potential savers. Scams are not a necessary consequence of the pension freedoms.

122.We were concerned to learn that the FCA’s dedicated scams team only consisted of approximately 10 people out of 3,700 FCA staff. We recommend that the FCA review whether it dedicates sufficient resource to combat active pension scams, prevent new pension scams and protect individuals.

123.We recommend that the Financial Conduct Authority’s list of unauthorised firms be expanded into a widely publicised database. This database should be regularly updated by the range of governmental organisations involved in pension scams and act as a co-ordinated early warning system

As this appears to be the section of the report that the press is picking up on, I think we should remember it is but a fraction of a much wider investigation.

LAST BUT NOT LEAST – A word about the net-pay scandal

It looks like an add-on and doesn’t sit comfortably in the report, but I’m pleased that the fate of the 1m+ pension savers not getting their promised Government incentives to save – are recognised.

In 2019/20, those with earnings below the personal allowance and contributing at statutory automatic enrolment rates will see a difference of around £65 per year between net pay and relief at source tax relief arrangements. Over a lifetime of pension saving this will be a significant amount to many people and a significant proportion of their pension savings built up through automatic enrolment.

The Government says that it would cost too much to put this right. In doing so, it risks damaging faith in the system, by perpetuating arrangements which cause individuals to lose significant sums through decisions they did not make. 

41.We recommend that the Government resolve the discrepancy between net pay and relief at source tax relief arrangements as a matter of urgency. 

Note to HMT – kick arse at HMRC!


How influential WPS is – is hard to gauge.  It has certainly been influential with tPR over DB deficitis and its support of CDC and work on pension transfers have clearly shaped policy.

This report is wide-ranging and contains many good insights. It makes strong recommendations – especially when dealing with quantitative data.

When it comes to supporting members and staff on their difficult decisions at retirement it is less good, stuck in a rut of 20th century thinking which ignores the digital revolution we are going through.

I am really pleased we have this report and will draw from it in future blogs. What is important is that it doesn’t get swept under the table by a Government pre-occupied with everything else!

Posted in advice gap, age wage, auto-enrolment, pensions | Tagged , , , , , , | 1 Comment

Auto enrolment isn’t SERPS

workplace pensions

The original AE workplace pension

Many years ago I was involved with  the Kingfisher Retirement Trust, a bare COMP that just about competed with SERPS for value because it offered employees lower national insurance and the semblance of a pension.

Kingfisher (now B&G) offered a final salary scheme which you could opt into, about 5% of staff did – they were white collar and understood the difference between the KRT (a non contributory DC scheme funded by rebates and a 1% employer contribution and a sixtieth plan.

KRT was auto-enrolled and had a huge take-up. Unfortunately most of the people in it, had no idea that by being in it , they lost out on service in SERPS/S2P for an uncertain pension pot run first by Aviva and latterly by Eagle star.

One union called it the worst scheme in Britain, but -being auto-enrolled , it had massive take-up and had hardly any opt-outs.

Complete with member confusion

KRT worked on paternalism, there was a trust behind it and the employer believed that members were better in an insured with-profits fund than in the state pension. For a time the contracted out rebate made this kind of “bare-comp”feasible, but over time the rebates fell – frankly the plan fell into disrepute and has since been replaced.

What worried me at the time was that so many members thought that KRT was a company pension – which for them meant a plan that gave them a wage for life based on service. This view persisted because so little information on the plan got to members. There were for instance unit-linked investment options – but of the 100,000 + members, hardly a handful used them.

Members weren’t so much confused, but bemused. They had no idea what they were in and only got to find their hopes of a wage for life were false, when they got to scheme retirement age. I may be a little harsh on the trustees here, but knowing one or two, I think they’d share my characterisation of KRT as “not what it seemed”.

Are member’s confused by today’s master trusts?

The excellent Ray Chinn – who is a customer champion at NEST, reported that a high proportion of NEST members thought that NEST- being a Government pension, would give them a Government pension.

This is a cosy enough place to be for NEST, it is unlikely that many members will opt-out and they can carry on building up their investment pot, with the problems of explaining the misconception left to the next generations of NEST trustees and management.

NEST is not the kind of organisation that likes to disturb its members – it famously runs a low-risk default for youngsters because it thinks young people, discovering their investment pot has gone down, might get put off saving. It’s the kind of wonky thinking born out of a deep-rooted grounding in state sponsored defined benefit schemes where members take no risk.

The golden rule of this kind of thinking is to let sleeping dogs lie, which is precisely why Adrian Boulding and NOW’s disruptive 20 year charge projection table has created a furore.

Here’s Adrian reigniting the blue touch paper after Darren Philp of Smart went to press over his table

Of course Adrian Boulding is not impetuous, he knew just what he was doing and he did it well. He asked us to think about what we were choosing as workplace pension for our staff.

I am hoping that staff in workplace pensions will start asking where their money is going because many of them don’t give the investment of the money a second thought. This is clear from this vox-pop from Quietroom, from work done by Investec and by Ignition House

We can’t let people sleep-walk into retirement

Some time ago – we took the decision to scrap the state second pension (aka SERPS). We did so because we wanted people to own their own investments, data and retirement choices.

We decided to go the funded pension route, and what’s more, we decided that there should be multiple pension providers competing for our money.

But there is a strong group of pension experts who do not share my belief that we should tell people that

a) their money is invested

b) how their money is invested

c) how these investments are doing

These people are left of centre paternalists who see the success of workplace pensions as dependent on people being kept in the dark, asleep to what is happening to their money and blind to the performance of the investments (both in terms of returns and ESG factors).

These people are like the Trustees of KRT, they are not evil or in anyway malicious, they just think the interests of ordinary people are not best served by telling them what’s going on.

It’s well worth tapping through to the rest of the thread. Gregg and I are friends but we hold radically differing views on the need for engagement.

I think that Gregg would ultimately like to return to the days of SERPS. That wouldn’t be such a bad thing in an abstract world where theories dominated. I was nearly sacked for being quoted by Barbara Castle as saying that all private pensions aspired to the efficiency of SERPS.

But the world has moved on and Gregg is now working for a workplace pension scheme which has well over 4m members, each with an individual pot. It is a much better scheme than KRT but it is still a DC plan which depends on member contributions. Those contributions are currently too low to possibly match the benefit of a company pension scheme as KRT members understood “company scheme”. Contributions are high enough to make People’s give ordinary people more than SERPS, but people have the opportunity to use People’s to get themselves a great deal in retirement.

To do that, they need to feel that People’s pension is worth investing in. I urge People’s to start promoting the great things it is doing with its default and the excellent outcomes that arise from its low charging structure and sensible investment options.


workplace pension 5

Posted in advice gap, age wage, pensions | 3 Comments

Without contingent charging – will IFA’s get paid?

contingenet charging

I don’t think enough attention is getting paid to credit risk in the debate on contingent charging.

Clients of IFAs sign up to Terms of Business that typically offer a means of remuneration for the IFA from the money that the IFA is advising on. Where there is no money, such as in the purchase of life insurance, or other protection products , there is a commission payable by the insurer. Either way, there is certainty of getting paid which is why IFAs like their creditors to be funds and insurers rather than their clients.

This is not always the case. IFAs who have wealthy clients find they are used to writing cheques and paying VAT on professional services. So contingent charging is less needed in certain circles. However, given the choice of paying VAT on the service or not, I know which I would choose.

So the system reverts to contingent charging as the line of least resistance. IFAs do not want to spend a lot of time chasing creditors, insurers and the operators of fund platforms make good creditors who pay on time and are easily chased when they don’t.

So what if we move to fee charging for all?

The argument that is given for retaining contingent charging is that it promotes advice to a much wider range of potential clients. In practice, advisers would not do business with clients who potentially didn’t pay their bills.

Direct fees are not only more transparent, they are more expensive (as they are typically loaded with VAT) and they are paid for out of taxed income, rather than out of a tax-exempt fund (pension) or a loaded premium of a life policy.  Direct fees are painful and they don’t always get paid.

There is a side of me that says “welcome to the real world” till I realise that actuarial consultancies (like most large law firms) don’t have private client departments – other than for the super-wealthy.

The problem is not so simple as it appears. IFAs are necessarily dealing with private clients and we have around 25,000 of them in the UK. Without contingent charging, I imagine it wouldn’t just be the breadth of advice that would suffer, it would be the number of advisers – capacity.


This has been the central problem of the RDR and it isn’t going away. The FCA recognise that there are hardship cases where advice is needed and can’t be paid for up front – hence the carve outs in CP19/25. Al Rush has argued for them and I agree.

The question is where do you draw the line.

At what point do you accept that independent financial advice is a luxury item beyond the means of most people (who will have to make do with DIY management – unadvised drawdown- the purchase of commission paying products like equity-release and annuities?

I don’t have a problem with an advisory market that targets IFA as a premium service that is bloody expensive but worth it.

I don’t have a problem with the idea of an annuity broker like Retirement Line who declares its commissions upfront.

I do have a problem with the idea of “free advice” that is “mutton dressed as lamb” product selling.

If this sounds regressive – perhaps it is.

The fable that IFA should be available to all is both unrealistic and actually harmful. That’s because of the credit risk of running a mass market fee-based service and the perils of contingent charging.

Much better to split out IFA as a fee charging service that requires VAT to be paid on the fees and for the fees to be paid out of taxed income.

Anything else is not IFA  – it is advice that is product dependent.

The improvement in standards of IFA since the RDR is self-evident. There is now a mass-affluent market which it can serve on the basis of charging fees without tax subsidy.

If that means that some of the business plans of IFAs – predicated on serving another part of the market using contingent charging have to be withdrawn – so be it. They were rubbish business plans which carried the potential for consumer detriment and therefore regulatory and political risk

For years IFAs have ignored the regulatory risks of contingent charging.

Now those risks are being exposed, many networks will suffer, some small advisers will go out of business. The numbers of IFAs will reduce as will turnover. Profits will also reduce.

All of this is necessary because the IFA has to move onto a more sustainable remuneration model if he or she is to be considered as a provider of a professional service rather than a product salesman.

For confident IFAs like David Penney, an upfront fee charging model is no problem

But most IFAs and IFA networks cannot be confident of a high fee recovery rate. The credit risk of unpaid invoices looks immense and taking the step beyond contingent charging too daunting.

The pain of taking that step cannot be underestimated and that is why contingent charging is the issue it is.

IFAs will only get paid by direct fees, if they are considered worth it. Most IFAs are worth it, contingent charging has had its day and so have the financial advisers  who can’t live without it.

Posted in pensions | 3 Comments

Bosses + trustees talk “pension choices” too!

agewage advice

This blog looks at what the FCA is planning to do to regulate the way unadvised drawdown plans are presented to customers. This follows the publication on a further policy paper from the FCA – CP 19/21

The point of the blog is to explain that the choice architecture discussed by the FCA can be talked about by non FCA regulated people – the employers with workplace pensions and the trustees of occupational pensions – including the multi-employer ones,

These people are often outside the FCA’s line of sight!

What’s new?

The FCA have made three simple changes to the proposals in their Retirement Outcomes Review – changes that are intended to help people who don’t  take advice when drawing down from their pension pot (or pots)

The FCA plans to

  • introduce ‘investment pathways’ for consumers entering drawdown without taking advice
  • ensure that consumers entering drawdown only invest mainly in cash if they take an active decision to do so
  • require firms to send annual information on all the costs and charges paid over the previous year to consumers who have accessed their pension

According to the FCA, around 30% of consumers who enter drawdown, do so unadvised.

It proposes that such people are given a range of investment pathways which might include continuing with the current investment strategy and drawing nothing, preparing to buy an annuity , or drawing the money from the pension pot into a bank account (drawdown). The investment pathways are collectively know by the FCA as “the choice architecture”.

The Retirement Outcomes Review found

  1. Many consumers, particularly when focused on taking their tax-free cash, take the ‘path of least resistance’ and enter drawdown with their existing provider.
  2. Around 1 in 3 consumers who had gone into drawdown recently were unaware of where their money was invested.
  3. Some providers were ‘defaulting’ consumers into cash or cash-like assets. Overall 33% of non-advised drawdown consumers were wholly holding cash.
  4. A consumer drawing down their pot over 20 years could increase their expected annual income by 37% by investing in a mix of assets rather than just cash.
  5. Evidence suggests drawdown providers could improve investment outcomes for consumers by offering more structured options and making the decision simpler to navigate.
  6. Charges for non-advised consumers vary considerably from 0.4% to 1.6% between providers. Average charges are higher than in accumulation, and can be complex and hard to compare.

Some simple thoughts

When I sit outside the FCA’s bubble and consider things as an employer and on behalf of trustees, I am asking myself the following questions.

What is wrong with non-advised drawdown?

The problems with non-advised drawdown are listed – but not everyone who chooses non-advised drawdown does so as “the line of least resistance”, for many people it can be a smart decision. I’ll explain why..

The paper was published on the same day as the pile-driver of a report into adviser behaviour over transfers (CP19/25).

The costs of advised drawdown established in CP19/25 are considerably higher than the 0.4- 1.6% quoted here

Total ongoing advice charges of 0.5% to 1% will reduce an average transferred pension pot of £350,000 by £145 to £290 each month in the period immediately after transferring. Similarly, ongoing product charges of 1% to 1.5% will reduce it by a further £290 to £440 each month. So the total deductions on a transfer value of £350,000 would range from £435 to £730 each month. A DB scheme with that size of transfer value might have a current income value of £1,000-£1,200 each month, so the charges represent between 44% and 61% of the current level of that value.

It would seem from the FCA figures that not only is the cost of non-advised drawdown cheaper because it doesn’t include adviser charges but because the cost of the drawdown product itself are cheaper 0,4% – 1.5% pa for unadvised and 1% to 1.5% for advised.

While the pensions industry gasps at the stupidity of people DIY’ing their drawdown , I suspect there are many in the FCA who see such people as quite smart. They are at least doing something to combat the 44-61% income cut – occasioned by entering into advised drawdown.

I don’t think there is anything wrong with DIY if it can substantially increase your retirement income. For some people unadvised drawdown is more than the line of least resistance – it is an active choice which is right for them.

What is wrong with talking with an annuity broker?

Annuities provide a certainty that drawdown don’t – and they provide a genuine insurance against you living too long.

If you go to an IFA, you are unlikely to get much help buying an annuity.

As Eugen says, IFAs are not set up to broke annuities, if you are looking at your retirement options in retirement in a holistic way, you are going to have to shop around and find yourself an annuity broker.

If you rely on the line of least resistance and buy the first annuity that comes your way (one from your provider) you may end up like the people who are currently seeking redress from Standard Life. Annuity shoppers need to shop around.

In my work for AgeWage, I have done research on annuity brokers and recommend you talk with Retirement Line

Could something better come along?

If we get a Pensions Bill this year, then it will contain the legislation to enact CDC for Royal Mail and an open door for other types of CDC – including decumulation only CDC which would allow you to swap your pension pot for a scheme pension.

This could provide a halfway house between an annuity and a drawdown policy with more income than the annuity and more certainty than drawdown. If you were to look at that glass half empty, you might say “less security than an annuity and less income than from drawdown” and I’d expect CDC to fit into the choices people have in future years as a further option (not a default).

I’m also asking….Is my choice architecture broken?

What the paper doesn’t cover is who is delivering the choices (other than the provider of the pension pot). In the wide-world, many of the people approached for help on these choices are employers who are generally told they should not offer advice but should refer people to Pensions Wise or tell them to see a financial adviser. I know and like Pensions Wise but many people who go to Pensions Wise just go back to their boss with a statement like “they told me to seek regulated advice from an independent financial adviser, which doesn’t get the monkey off the employer’s back.

I am coming to the conclusion that the stock phrase “you should seek regulated advice from an independent financial adviser” is of limited value. It’s fine for the top 10% of people who have the money to pay for advice and the need for a very sophisticated approach.

But I don’t think that seeing a regulated  financial adviser tells you the whole story. An IFA may give you a long income and expenditure questionnaire to fill out to help him do his cashflow modelling, he may give you a huge underwriting questionnaire that he can send to an annuity broker, but he is unlikely to talk to you about the advantages of either unadvised drawdown or of buying an annuity or of holding on till something better comes along.

If you are going to an IFA for help with your retirement choices, you will be offered advised drawdown as your default option and you will find it hard to get advice on much else. Even if you go and pay your adviser to get all the choices, you may not get them. IFA’s aren’t always providing the full choice architecture that people actually need,

I think people need to have a different type of choice architecture that lists what is around now – advised drawdown, non-advised drawdown- but also what may be round the corner – CDC and the options that may emerge by waiting to take decisions.

After all, while the cost of delay to starting saving is obvious enough, the cost of delaying your starting spending your pension savings is a lot less clear.

We’re discussing all this at a series of workshops over August

If you are in charge of helping members of an occupational pension scheme or your staff in a group personal pensions with these tough choices at retirement, you might like to come to one of our four seminars in WeWork More Place on 13th, 14th , 28th and 29th August.  Places are limited so if you are a consultant or adviser, we may not be able to fit you in, but please apply anyway and we can have a chat.

Along with AgeWage, you’ll get to hear about Choice Architecture from Quietroom and about Annuity Broking from Retirement Line. The sessions are 90 minutes long and we’re calling them workshops because we want all the participants to do some hard work establishing how they can adapt the choices they offer their staff to the changing world created by pension freedoms.

We will of course be talking about unadvised drawdown as part of this , by which time I expect to have had some deeper thoughts on CP19/21


If you are interested in the choices offered by employers and trustees, you can sign up for our seminars via this link

Sign up to AgeWage’s summer workshops



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

Do we have to wait for the car crash, before we mend the road? CP19/25

It is now too late to ask whether there is about to be another mis-selling scandal. That question was asked to two years ago on this blog when I accused Tideway of sluicing through transfers using contingent charging. Tideway complained to my bosses at First Actuarial and we agreed that rather than damage my company, I would withdraw my comments.

Throughout the summer of 2017 I persisted in raising the issue of high volumes of transfers conducted under a contingent charge price model that gave customers what they wanted now at a price paid much later. I pointed out that contingent charging provides advisers with the opportunity to take money from a tax-exempt fund and saves them charging the client (unrecoverable VAT).

When the Port Talbot factory gating happened in the autumn of 2017, it became clear that it wasn’t just FT readers who were swapping pensions for wealth management, it was steelworkers who , by and large, had no idea what they were doing.

Since then I have been working with people from Al Rush’s Chive operation, with Trustees and managers of occupational pensions schemes and with the regulators to explain that the problem is an epidemic and that it will not stop until there are interventions from the regulators.

Now – 18 months later – the intervention has come , but the damage has been done. The broken vase lies in pieces on the hall floor. The car has hit the pot-hole and is in the hedge.

The cost of compensation is based not just on the wrong that has been done at the point of transfer, but from the ongoing fees charged by advisers and wealth managers above and beyond the cost of maintaining the CETVs in simple workplace pensions.

The weakness of an evidence based regulatory approach

Well put Jo! But there is more to say about the evidence. The FCA used as evidence the information they were passed by IFAs which may have been incomplete and wasn’t timely. They are still talking of transfers in 2017 running at £20bn. TPR published figures for the year that suggested £12bn – based on the patchy returns they got from occupational DB schemes.  This month, TPR revised its estimate of transfers for 2017 from £12bn to £34bn – in line with the MQ5 ONS statistics.

The weakness of the evidence based approach is that if you rely on your own MI and your own MI relies on reporting from the people you are regulating, you’ll have to wait a long time to hear the truth.

The fact is that the evidence that I saw, occupational schemes saw, Frank Field and WPS saw and Jo Cumbo saw, was not acted on in a timely way.

“The cost of delay”, a phrase that every IFA is familiar with, is around £2bn a year, a cost that will be born accross the industry making IFAs more expensive and making the business of converting workplace pensions to a wage for life – yet more hard.

What is the evidence of contingent charging priming the pump?

We have to read to page 60 of CP 19/25 to discover the clear correlation between contingent charging and transfer value completions. There’s a simple correlation, the more the money flowing into private management, the higher the levels of completion

Screenshot 2019-07-31 at 06.38.14

The FCA are clear in their minds, transfer advice is being influenced by the financial reward to advisory firms of taking the money

Screenshot 2019-07-31 at 06.38.25

So when , a few pages later, the FCA complete their analysis, there is no hesitancy in their conclusions

Screenshot 2019-07-31 at 06.34.17

These numbers are truly shocking and what is equally shocking is the amount that the FCA believe is being taken out of consumer’s pockets through the use of contingent charging.

which adds up to a massive £445m a year in revenues to IFAs created by the adoption of the contingent charge

The damage this does financial advice

Financial advisers will no doubt turn on me and accuse me of making matters worse. I don’t think I can make matters worse. The FCA’s CP19/25 simply tells the story this blog has been telling for the past 30 months.

I warned financial advisers of the damage they were doing and financial advisers (Tideway especially) tried to get me sacked from my job.  I warned how fractional scamming would destroy the wealth pots of Port Talbot steel men and Gallium threatened me and Al Rush with legal action.

The IFA trade bodies have failed to take a lead and call for the ban of contingent charging and the PLSA, PMI and most of all tPR, have stood on the sidelines wringing their hands but not getting involved.  The £60bn that has left occupational pension schemes in the past three years has – after all – been £60bn less in liabilities on the corporate sponsor’s balance sheets. IFAs are – in a very macabre sense – protecting the PPF.

In all this – who has been standing up for the consumer? Michelle Cracknell did – but since she departed TPAS, MAPS has been silent.

Frank Field has and does, but nobody seems to be listening to him

TPR is about as relevant as a dead haddock.

As for the trustees (and advisors) to occupational DB schemes, they have been quite hopeless. I will not forget being dismissed from Willis Towers Watson’s offices in June 2017 for daring to tell the BSPS trustees they had a crisis of confidence among their members that was resulting in mass desertion from BSPS. To this day I have not had a single word of response to our recommendation they establish a transfer helpline.

In short, the £2bn a year compensation bill that is coming our way is down to a collective failure to take responsibility for the heinous behaviour of  a high number of IFAs who have behaved very badly indeed.


Posted in advice gap, age wage, BSPS, dc pensions, de-risking, pensions | Tagged , , | 4 Comments

Get rich slow – especially if you’re Greg and Amber

Greg and Amber

Congratulations Amber, Greg (and Jayden)

In a shameless attempt to attract younger readers to this boring blog, I publish this picture of 16-34s favourite, Greg and Amber. Love Island winners, they’ve dominated the twittersphere for 8 weeks with 4.3m viewers plugging in to ITV2 every week.

Greg and Amber are now set for a lifetime of endorsements for hair products, tattoos and money generation for every other body image under the sun (or sunlamp).

It’s also been a good weekend for the get rich quick brigade with Fornitely star Jaden Ashman pledging to spend the £900,000 he won on a house for his parents.

Back in my day you made it rich quick by being in the Bay City Rollers and I remember teenyboppers up and down the land scaring parents by pretending they would put popularity before pension , success before sobriety and try to get rich quick.

Now I’m writing a blog with the words of Laura Lambie of Investec ringing in my ears as she sounds off on Wake Up to Money about Jayden being a dangerous example for young kids.

Oh my goodness – how I’d like to be Jayden or Greg or Amber!

But I’m not, I’m a boring 57 year old in receipt of a pension with a substantial pension pot that went up 2% yesterday because of Boris’ plans to sink the pound   take us out of Brexit.

If you’ve saved all your life and saved hard and worked for employers who help you save you accumulate a lot of money, so the 2% rise in my Legal and General pension fund is worth about £10,000 to me, which is not as much as Jayden and Greg and Amber won, but so long as I stay calm and invest in sensible things that do good for the planet,  I am going to be alright.

My advice to Jayden and Amber and Gregg – for their own sanity – is get rich slow. Do not forget to put money into a pension fund and make sure that the pension fund you put money into is invested for the future – with an eye to keeping this planet’s land  green and ocean’s blue.

Jayden, don’t put all your money in a house for your parents, put some in a pension for yourself.

Gregg and Amber, make sure your savings don’t run out before your good looks.

Be kind to yourselves – all three of you – for no-one will be kinder.

A cautionary tale – look after yourselves.

A friend of mine emigrated 25 years ago with a young son from Moldova, she was a nurse but chose not to join the NHS pension scheme so that she could save for a deposit for her house.

By the time she could buy the property , her son was old enough to be on the deeds and she made him the house’s owner. He has married , has kids and a good job in the City. He is selling the house but none of the money will revert to his mother who is living in rented accommodation after spending some time living in her car.

She has finally joined the NHS pension scheme but has missed a lifetime of saving which could have set her up in later life. Such is the risk of putting others before yourself.

Greg, Amber and Jayden, do not give it all away, put money in your pension for the future, the taxman will look kindly on you and provided you use a sensible pension scheme ( a workplace pension or a copper-bottomed SIPP) you will not go far wrong. If you are reading this – call me at – I’ll tell you it how it is.

Do not let yourself be beguiled by sentiment – look after yourselves so you don’t become a burden on others as you get older.

Youth’s a stuff will not endure

Laura Lambie, is right to warn the rest of us of relying on Amber , Greg and Jayden’s good fortune. But it takes more talent and application to win Love Island or come second in Fortnite than winning the lottery.

There will always be people who rely on winning the lottery for everything and they are playing a dangerous game, there are many aspirant Jaydens Gregs and Ambers who will get over it and get on with living a normal life.

There will be some who become beauty school drop-outs or nerdy Fortniters wasting away in their bedrooms, but not many. The casualties of Love Island will be few and far between – for the most part it gives the under 34s a laugh and (dare I say it) the over 34s a memory of what life once was like.

What’s to come is still unsure ; so come kiss me sweet and twenty.. youth’s a stuff will not endure.

Posted in pensions | Tagged , , , | 1 Comment

Why it’s good Rudd/Opperman stayed put.


Opperman - back.jpeg

Contrary to all the rumours – Guy Opperman and Amber Rudd are still in position and Britain has some unexpected continuity in its pension policy making. I was asked last week to comment to a group of civil servants on whether I was happy with the leadership we were getting and I replied I was. I am not sure that was the answer that the group were expecting but it is genuine.

Opperman and Rudd can at least claim they have not done too much wrong. This is a rather weak statement , but Opperman has at least avoided the banana-skins.


A qualified welcome

I say this in a qualified way. Guy Opperman cannot be thought of as creative, the policies he has adopted have been winners (auto-enrolment) and he has stayed clear of taking on challenges (net pay anomaly, Pensions credit). He has supported the dashboard , but getting on for 9 months after its relaunch we have yet to see tangible evidence of progress.

The much trumpeted amalgamation of TPAS and MAS into MAPS (formerly SFGB) has run aground with the unexplained departure of its CEO, still tweeting about local issues (other than pensions). No new CEO has been announced and its chair Hector Saintz seems to be ruling that particular roost. It’s hard to get excited by an organisation in “listening mode” with such internal disruption.

When it comes to giving the public better pensions information, we are told that 3% of state pension forecasts delivered digitally are materially wrong. The problem seems to relate to years of underpayment of NI for those in contracted out occupational pensions. Most of these people are close enough to retirement for this to be a material issue.

A Treasury branch line?

It’s hard not to feel that the price for continuity has been paid by a dilution of the DWP’s ministerial influence. Opperman took his post as an “under-secretary” of State, a downgraded role. Now we hear Amber Rudd’s role includes being minister for equality. As if sorting out work and pensions wasn’t enough.

We heard last week from Amber Rudd , relying to Nigel Mills on issues arising from Standard Life’s £31m fine for stitching up savers with small DC pots

It seems that the DWP have cottoned on to the problem that the Treasury’s FCA has been failing to solve for the past fiver years . The FAMR has not found ways to help those with small DC pots to get advice – what makes us think the DWP will be any different?

Last week, Lloyds Banking Group’s main union Accord, accused LBG of selling advice to its customers but denying it to its own staff. Demands on employers to do more to solve the consumer issues arising from Pension Freedoms are growing.  Has the DWP got a credible policy (beyond “encouraging Mid-Life MOT’s”, to tackle the growing problem of people retiring without access to substantive help with their pension options?

The DWP must be collective and creative

The fact is that the scope of DWP’s regulator – TPR – is limited to fining employers over auto-enrolment breaches and the trustees of occupational pensions for breaches of institutional rules. There is simply no D2C element in DWP’s control.  At best the DWP is an advisor to the Treasury, at worst – it is a branch-line where unwanted engines and rolling stock are sent to work out their days.

If Rudd and Opperman are to prove themselves in the pensions space, they have got to prove themselves as more than the Treasury’s poodles and the champions of legacy pension policies.

That means coming up with meaningful mass market solutions. By meaningful, I mean CDC and not a sexy but frivolous extension to Pensions Wise that is branded  “mid-life MOT”.

Time to return to the dashboard?

The only opportunities that DWP have to make a real contribution to the UX of pensions are in the provision of mass market spending plans (CDC) and the means to see and manage multiple pension pots and rights on a digital dashboard.

The problems that beset the pensions dashboard are well known. The Government wants to have a 21st century product but are frightened of the consequences of adopting open pensions.  They are – they say – laying the foundations of a strong and stable dashboard by appointing their own to manage the project within MAPS.

Last week the dashboard issued requests from the wider industry to person the pension dashboard steering group. Why this has taken so long I don’t know, what we can be pretty sure of is that it will be a consensual group that will deliver more strong governance and lots of prescription around what the dashboard cannot do.

This will have the impact of centralising the dashboard around the ABI’s agenda , ensuring that the dashboard serves as a consolidator for what we have – rather than as a means to what we could have.

There are plenty of people outside the usual suspects who could put themselves forward to create a dashboard that really worked, but whether they have the appetite to risk once again being ignored in favour of a conservative consensus. Without wider Governmental support the dashboard project remains for me – a pipe dream. It has much more the look of Universal Credit than Auto-enrolment.

So why am I happy?

I am happy in a resigned way. Losing Amber Rudd and Guy Opperman would have lost us our Pension Bill and with it, the chance of developing collective DC pensions which I see as the way out of the problems pension freedoms are bringing us.

It would also mean starting again with the Pensions Dashboard which undoubtedly would be subject to yet another review from an incoming ministerial team.

As for the third plank of the Pensions Bill, legislation to help DB pensions consolidate, I am not so concerned. If it has to be sacrificed in return for legislation on CDC and the Dashboard, so be it.

The Pensions Bill remains the one tangible outcome of Guy Opperman’s tenure so far. If you take the time to go through the claims in the DWP’s video, it is hard to see beyond the Dashboard and CDC as areas where Government can make a genuine difference

Other matters , such as the requirement for Trustees to make statements about their policy on ESG are little more than inclusion of pensions in a societal shift. Meaningful work is being done in the DWP regarding pension disclosures , but I sense these will need the FCA’s adoption to move the dial on how we see “Value for Money”

The dashboard and CDC are the big-ticket items and without Opperman and Rudd at the helm, both would have been subject to further delays.



Posted in pensions | 1 Comment

The tawdry state of DC cost disclosure


NOW pensions, perhaps tired of being labelled the pariah of master trusts has come out fighting with the following table which shows in certain circumstances, their charging structure provides good outcomes, investment returns being even.

Screenshot 2019-07-27 at 08.31.09

Because of the peculiar nature of NOW’s charging structure, the impact of the £1.50pm policy charge dilutes over time while the impact of higher percentage of fund management charges (AMC), increase over time. NOW’s costs are front end loaded, hurting those who only make a few contributions, those with higher AMCs are back end loaded and hurt people who keep their contributions going and build up a hefty fund.

The problem with this analysis is that it ignores the fact that people move jobs on average 10 times over a career and that those with 20 years paying monthly contributions to one provider are minimal compared to those with lots of small pots.

Adrian Boulding, who was brought up in the days when life companies used to report profits based on 20 year persistency assumptions, knows only too well that the 20 year career expectation is a tad rosy (for all but L&G actuaries!).

So why is he trying to pull this stunt?

I suspect it’s because NOW are in the final phase of getting their Master Trust Authorisation after which it will be the Dutch Cardano, not the Danish ATP who will own NOW.

So it’s time to get on the boxing gloves and show that NOW are still the combative and disruptive force they were when they started out some eight years ago.

And of course, one of the great features of master trust advertising is that NEST aren’t really able to do it so everybody else can say what they like about NEST without fear of getting much more than a metaphorical upper cut from the (sadly departed Debbie Gupta).

NOW are proving that old habits die hard and happily misquote NEST as having a 1.8% additional charge not just on regular contributions (See above) but on transfers in. The table below is looks at a single contribution or transfer-in of £28,000 (equal to one year’s earnings) from another pension plan:

Screenshot 2019-07-27 at 08.31.28

Adrian Boulding tells me that he had spotted this mistake and re-cast the numbers but that’s not what this looks like to me. This looks like NOW simply rolling forward their numbers with a £1.50 pm management charge while NEST has a £504 deduction (1.8%) at outset. Unsurprisingly this gives NOW an edge which is totally fictitious.

So in good old -fashioned disruptive style , NOW are peddling fake news which I suggest would be picked up by the advertising standards authority if pension fund disclosures were taken seriously by anyone.

Of course no one takes this stuff seriously – why should we?

The article evinced plenty of huffing and puffing from Smart’s anonymous spokesperson and from Pension Bee’s feisty CEO Romi Savova. John Greenwood managed to collect the bitching into a single article (though disappointingly he did not get the thoughts of NEST on the misrepresentation of their single premium charging structure. You can read the knockabout stuff here.

Romi’s indignation spilled over onto Twitter

Where is People’s in all this?

People’s Pension , which used to be relied on for getting involved in a charges punch up refused to share data with NOW pensions. They have a new charging structure that Adrian Boulding couldn’t quote but which would have made People’s look quite competitive in the second table.  Like People’s, Pension Bee’s charging structure rewards larger balances; to quote Adrian

“Romi halves her bee sting on funds over £100k”

It’s becoming quite a feature of People’s – they are isolationist and grumpy, I say they should lighten up – especially that poe-faced curmudgeon Gregg McClymont who should stop reading from the gospel according to Saint “Not For Profit”.

So what of slippage?

While all this slap-stick’s been going on, we’ve failed to address my earlier question, why does nobody take any of this seriously.

One answer is that simply comparing pension plans on the basis of overt charges is bonkers. It’s not like we’re even talking total cost , there are all the costs within funds that never get displayed in any of Adrian’s boxes but eat away at outcomes in exactly the same way.

The reason no-one quotes slippage in tables like this , is that it leads into the other component of value for money – value. If you’re going to quote the cost of investing, you need to quote the value of investing and now you start getting into deep water (especially if you are NOW). You are now not swimming in the lifeguard section but in open water.

We don’t have slippage because NOW are not happy getting out of their depth.

The tawdry state of cost disclosure

Bottom line, this cost disclosure stuff is old school and pointless. People are fed up with meaningless numbers thrown at them. They want to know how their pots have done, not this abstract projection stuff.

So long as we duck reporting on people’s actual investments and persist in fooling around with 20 year projections, people are going to carry on rolling their eyes and thinking “same old, same old”.

We need to have individual reporting on people’s own pots and that’s only going to happen when NOW, Peoples, Pension Bee, NEST , Smart and others start telling people what’s actually happened to the money that they last saw as a deduction on their payslip.

Quoting costs without reference to outcomes is like buying butter without bread.

So let’s get serious for a minute and start focussing on what really matters, the members and policyholders of the schemes we invest in and manage.

AgeWage evolve 2


Posted in advice gap, age wage, auto-enrolment, pensions | 3 Comments

Happy being part of the crowd!


Are you an A or a B (when it comes to investment)

Robin Powell – the evidence based investor – has produced a very simple explanation of why the valuations of stocks are 90% right. You can read it here. It’s based on the ask the audience responses to who want to be a millionaire where – following the wisdom of the crowd gives you a 90% chance of being right. I dare say there are better ways of arguing for investing in passive funds but there are few that are as easily understandable.

I also came accross an advert for some thought leadership from Schroders this morning which looked like this

Screenshot 2019-07-26 at 08.52.53

Not being a UK investment Professional, I pressed the link to the article with a degree of trepidation.

What the article told me, and told me very well- is that valuations of stocks can be wrong and that Schroders currently think that growth stocks are over-valued and value stocks are under-valued.

So if you think that you can control how your money is managed – you should be investing in the author’s fund – Kevin Murphys Schroder Equity Value Fund.

I work directly opposite Schroder and may have watch Kevin work out in its fine qym or pig-out in its fine staff restaurant. He is paid a lot of money because when 90% of people believe something that is wrong, he is able to put his hand up and say – “no it’s not like that at all – you should be investing in my value fund”.

But of course he can only say this to UK investment professionals because if he said that to the likes of you and me we might end up taking his advice and getting him and Schroders into a great deal of trouble.

I hope that in lifting the lid on Kevin’s article I have not started a landslide of money into value stocks and out of growth stocks. I take comfort that this is extremely unlikely.

That’s because 90% of people not only go with the flow and invest in defaults – but in doing so invest accross the market in both value and growth stocks – and a lot else besides. They trust the market valuations as 90% right and aren’t prepared to entrust their money to individual strategies like Kevin’s.

Here is another statistic.

agewage advice

The statistic is from the FCA – actually it should be 94% of people aren’t paying for advice as a lot of people take advice but don’t pay for it (but we used the FCA’s words).

Now I’m prepared to accept that the 6% of people who pay for advice , get value for their money and end up listening to UK investment professional persuaded by arguments from Kevin Murphy and end up investing in funds that beat the market.

That seems the deal we sign up to with wealth management and I’ve no problem with people paying wealth managers to find funds that fall into the category of the 10% of ideas that are right when everyone is looking the other way.

Well done the wealthy but…

What I find hard is convincing myself that everyone should be taking advice – or at least guidance that points them to advice.

Part of the reason for this is that most financial advisers tell me they can only manage around 100 clients at any one time, that means that with a working population of 40m – we’d need around 400,000 advisers – which about 380,000 more than we have today.

A second reason is that if you took that many people out of the working population, Britain’s GDP would reduce making the investments we make less valuable

And a third reason is that if everyone went chasing after the 10% opportunity, that 10% opportunity would soon be exhausted and we’d spoil things for the wealthy who are currently enjoying the exclusivity of being contrarian – paying for advice and going into funds that do the opposite of what everyone else is thinking.

But the best reason is that I really am quite happy having my money managed in my L&G workplace pension according to what they see as best for people like me!

I hate to say it but for 90 – 94% o us

We’re happy just the way we are!

The really good news for rich people is that poor people are showing absolutely no inclination to become contrarian investors and buy into funds like Mr Murphy.

They are quite happy not to read his article because they are not UK Investment Professionals. They are quite happy having their money invested in default funds by people who they hope know a little more about money than they do.

I know – I’m one of them. I’m one of the B’s.


And I don’t feel bad about it at all.

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

Scary news day!

steve webb

old photo – Steve Webb

Scary news day!

Yesterday (Weds 24th) saw the arrival of Boris Blimp in his West End townhouse and the announcement that nothing much has changed at the top of the DWP- except the SOS’ brief – which now includes equality for women.

We have yet to hear whether the Gove-loving Guy Opperman will survive the cut but Amber’s news suggests that work and pensions are not top of the PM’s priorities so maybe he’ll be spared.


The shock of old fake news.


Who’s got the unicorn now?

Weds 24th July 2019 also saw the publication of tPR’s estimates of pension transfers from DB schemes, via an FOI from former pension minister Sir Steve Webb.

Here’s Royal London’s deeply embargoed press release

Royal London asked the Pensions Regulator to update previous estimates of the volume of DB transfers and the latest figure suggests that 210,000 transfers worth £34 billion were reported to TPR in 2018/19.

The following table shows estimates for each of the last three years based on FOI replies:

Reporting year Number of transfers Value of transfers
2016/17 80,000 £12 bn (est)
2017/18 100,000 £14 bn
2018/19 210,000 £34 bn
Total 390,000 £60 bn


Sources: 2017/18 and 2018/19 figures confirmed in new FOI supplied to Royal London.  2016/17 volume figure from FOI on TPR website.  Value figure for 2016/17 estimated on basis of average transfer value of approx. £150k across 2017/18 and 2018/19 data.

Commenting, Steve Webb, Director of Policy at Royal London said: 

“These figures show the continuing huge interest in using pension freedoms to access pension rights in a more flexible way.  Although the volume of transfers has probably passed its peak, large numbers of people are still interested in seeing whether reshaping their pension benefits would be in their interests.  It remains the case that staying in a DB scheme will be the right answer for most people, but there may be individual reasons why a different combination of pensions would give a better outcome.  In such cases it is vital that there continues to be a supply of impartial and expert financial advice for those considering making such a big decision”.

If I was as rushed to get stories out as our pensions trade press, I’d have done what they did and print tPR’s version of the truth as gospel (fully endorsed by the FOI).

However, there is a  flaw in tPR’s methodology. They collect numbers annually in arrears – making all the numbers a year late.

If you want to know what really happened, you need to consult the ONS table 4.3 which gives you the cashflows out of DB schemes to other schemes in real time.

You’ll see from this cut of data, that the numbers quoted by tPR for 2018-19 actually happened in 2017-18;This image has an empty alt attribute; its file name is Screenshot-2019-07-25-at-07.41.02.png


The numbers are shocking – but it’s the shock of the old (4.3) that should be the news – not that it’s new news (the ONS numbers are published quarterly in arrears which is as close to real time as you can get).

The last ever cut of numbers for the MQ5 4.3 table was in March this year and this shows the numbers being continued through to the end of Q4 2018. We hope to get new and improved numbers in due course

Transfers for the four quarters of 2018 look like this

Screenshot 2019-07-25 at 06.49.34

What is new is the sharp drop off in the run rate of transfers from Q1 (£10.5m) to Q5 (£6.3bn). If this drop off is being continued in 2019 then far from supporting Steve Webb’s assertion about interest in pension freedoms, pension transfer levels may be returning to historical norms (reverting to mean as I’m supposed to say).

These numbers do not appear in TPR’s report but will no doubt be reported as 2019/20.

As Fred Norris, who compiles the ONS statistics , laconically puts it in his commentary

Transfers to other pension schemes in 2017 (£37 billion) and 2018 (£33 billion) were at the highest levels since the start of this series in 1984. This follows a generally higher level of transfers to other schemes in recent years and may be due in part to pension reforms introduced in 2015.

Note the use of the phrase “may be due in part”. The pension freedoms may have something to do with it , but I suspect that the bulk of the 2017 and 2018 bulge was down to the super-effective efforts of IFAs.

From the IFAs I have spoken to recently, transfer activity is being stifled by restrictions from PI insurers who are effectively giving IFAs “quotas”. That- combined with the departure and withdrawal of some of the most active IFAs in this market, makes the supply side a lot smaller. I suspect there may be some drop off in demand too – perhaps because of the monstrous bulge in transfer activity in 2017-2018 (and Q1 2019).

I maintain  that the transfer volumes are driven not so much by demand for pension freedoms but by the capacity and desire of IFAs to promote and fulfil pension transfers.

The problem with historical reporting

TPR is not alone in reporting DB transfer numbers in the wrong year and in incomplete amounts.

The FCA still stick by their figure for 2017-18 of £20bn transfers, a number compiled from IFA returns and well below the ONS numbers.  The ONS numbers do – it is true – include some Occ DC transfers out, but these are small beer, the real news is that both TPR and FCA have been under-reporting the scale of DB transfers.

The people who know the scale of the transfers are the recipients of the money . 2017 and 2018 have been golden years for single premium pension payments into DC accounts with the big players like – Prudential, Royal London, Old Mutual, Zurich and the platforms with their various SIPP partners.

I could have written an alternative commentary to Steve Webb’s which could have thanked IFAs for the new business and thanked tPR and FCA for under-reporting the scale of activity until the money was fully on the fund platforms of the DC providers.

The problem with historical reporting is that it allows the insurers to shut the stable door after the horse has bolted. The horse is now standing in the paddocks of the insurers and SIPP providers.

Scary news day – the shock of the old

I don’t know if the Royal London PR team deliberately timed the announcement of old and to a degree – fake news to coincide with the arrival of Boris Blimp in his Westminster Town House, but it appears to have scooped the news pool.

I hope that one or two of the less time -constrained journalists in the national papers, will look at these numbers for what they are – which is a reflection of how behind the times TPR is, in understanding the data.

ONS was the source for this data and we await a new source now that MQ5 has packed it in. For the moment we are left reading MQ5’s obituary

As initially announced in September 2018, this is the final MQ5 statistical bulletin in its current form.

Over the next two years, changes to Office for National Statistics (ONS) surveys that cover the financial sector will be necessary as part of the Enhanced Financial Accounts (EFA) initiative whereby the ONS, in partnership with the Bank of England, plans to improve the quality, coverage and granularity of UK financial statistics. This will be achieved by using new data from commercial, regulatory and administrative sources and reducing the burden and compliance on businesses that return our surveys.

This work entails wide-ranging redesign (and in some instances replacement) of the existing surveys that currently provide the data presented in this publication, making continued production of the MQ5 in its current form unviable. Therefore, the MQ5 will now cease and the ONS apologises for any inconvenience this may cause to users of this publication. However, this work should ensure that improved statistics relating to the investment activities of the UK financial sector, can be produced within the next two to three years.

The scariest news today is that we are currently in the dark about what is happening in 2019. Goodness only knows what is going on in and outside the stables.


Where’s the unicorn heading?


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

Who’s accountable for Standard Life mis-selling? – Answer; we all are.


In case you missed it, Standard Life was fined £30m for allowing its staff to abuse the trust of its customers and sell them annuities that paid them a lower pension than they could get elsewhere.

The fine would have been £40m but through a plea-bargain, Standard Life got 25% off.

You might think that Standard Life could treat their captive customers how they liked and that “caveat emptor” applied but you would be wrong.

The FCA operates under the principle that insurers treat their customers fairly and by denying their customers the benefit of open market and enhanced annuities, Standard Life failed.

This was not a “cock-up”. This went on  between 1 July 2008 and 31 May 2016, it was a systemic feature of the Standard Life business model.

Those who campaigned to get these sharp practices banned have long memories and undiminished passion.

But who will be accountable for this crass behaviour?

No one will be blamed

Since 2016 Standard life has passed through an intermediary stage as Standard Life Aberdeen before becoming a part of the Phoenix Group. The head of its workplace pension division became a non-executive Director of Phoenix before being appointed last month as CEO of Royal London

The head honcho – Alan Nish is now on the audit committee of HSBC bank where he’s also a non-executive director.

Other senior executives of Standard Life hold equally important roles in the insurance sector and the degree of personal accountability for what has happened appears to be zero.

The last person standing is current Standard Life CEO, Susan McInnes  . Susan is not a Standard Life person, she has worked at Phoenix Group for ten years but only took on her role with Standard late last year. She is playing a straight bat as she should.

No single person will be fingered for the way that Standard life preyed on customers with limited financial capability and a trust in the Standard Life brand. The bill will be picked up by Phoenix shareholders and the affair could be swept under the carpet as something that “wouldn’t happen today”.

I think we have to pragmatically accept this and make sure this does not happen again.

Let’s take a step back – this was an abuse or trust.

Standard Life aren’t any old insurance company. Although Standard Life Assurance only set up shop in 2005, Standard Life as a mutual traces its roots back to 1825 as it proudly boasts to those who are part of its advisory network – 1825.

Screenshot 2019-07-24 at 08.21.11

As with Equitable Life, the probity of Standard Life was based on its mutual roots and its longevity. As with Equitable Life, this probity is being tarnished by its behaviour around post retirement options. The annuity problems at Equitable were different than those at Standard Life but when push comes to shove, the customer was mis-sold at both.

Standard Life abused the trust that it had created over nearly 200 years.

We cannot say this wouldn’t happen again today. We are responsible for making sure it doesn’t and that means taking a look at what happened and learning lessons.

Any difference between Equitable and Standard Life?

The main difference in accountability between Equitable and Standard Life was that the former’s management team managed the flack and took it themselves. I don’t say this exonerates Roy Ransom and his team, but at least they faced their music.

I don’t see any of the Standard Life team who were at the wheel between 2008 and 2016, being called to account for the way the company set up, managed and profited from the sale of Standard Life annuities and this worries me.

But it doesn’t worry me as much as the thought that annuities and other at retirement products are still being mis-sold today.

Very different for some

Not all at the coal-face can walk away from the problems they create.

For  UK regulated financial advisers, the option to walk away from the advice they have given -for instance on pension transfers – is not available. They can rightly ask why this is not the case for executives of insurance companies.

And the annuity brokers who were cut out of the chance to offer whole of market annuity advice can only watch on.

Insurers, advisers and brokers all have a part to play in promoting good decisions at retirement. We should be working with Pensions Wise and MAPS to ensure that vulnerable people go to places where they are treated fairly.

I know the Equitable whistle-blowers – they were heroes, those who blew the whistle on Standard Life must have been brave too.

I don’t think we can expect the FCA to be able to spot every rogue advisor in the UK (and abroad). It is up to those of us who are involved in helping people taking decisions at retirement to make sure they don’t end up in the hands of Equitable or Standard Life style practices.

Could this happen again?

As I have said on this blog before, I  am deeply uncomfortable about the way some occupational pension schemes offer no guidance to members approaching retirement.

There are good annuity brokers out there, Retirement Line and the Hub being two.

But Trustees and large employers who run their own occupational trusts are reluctant to point their staff to such brokers, worried about the implications to them of signposting a “wrong option”.

But as long as they aren’t signposting the open market option and offering a link or a phone number to a reputable annuity broker, they run the risk of staff falling into the hands of scammers – or perhaps other direct sales forces who may be behaving like Standard Life (dd).

So yes – absolutely – this could happen again.

How you can protect your members and staff from poor annuity purchasing

Part of the problem at Standard Life was down to a failure of employers with Standard Life Workplace Pensions to properly flag the value of the open market option and of getting a medically underwitten annuity.

If you are involved with an occupational pension scheme which has a DC section (including DC AVCs) or a workplace GPP you are welcome to come to one of four summer seminars I am running in WeWork Moorgate

We  will be addressing this issue and introducing Retirement Line as a straightforward way of ensuring the problems which happened at Standard Life, don’t happen to your staff/members.

You can sign up to one of these seminars which are on 13th, 14th of August and 28th and 29th of August using this link SIGN UP HERE

Most people don’t take financial advice and many who buy annuities still do so without the expertise displayed by Retirement Lined and other reputable brokers.

We cannot pretend that the problems at Standard Life won’t reoccur. So long as we have vulnerable people with limited financial capability, we will have people ripped off at retirement.

So it is up to the people who run the reward, HR, pension and general management functions that operate workplace pensions to step up to the plate and make sure that what happened at Standard Life for 8 years – does not happen again.

Come to my seminar on how we can take responsibility – click here

responsible 2

Posted in pensions | 3 Comments

The impact of NDAs on pension outcomes


NDAs (non disclosure agreements), have been much in the news in the past week.

The government says it will crack down on the use of workplace “gagging clauses” to cover up allegations of harassment, discrimination and assault.

Many businesses use non-disclosure agreements (NDAs) to protect commercially-sensitive information. But employers have been accused in high profile cases of using the clauses to silence victims of workplace abuse.

The proposed new laws will ban NDAs that stop people disclosing information to the police, doctors or lawyers.

Are NDAs in pensions being used to protect commercially sensitive information or to gag whistleblowers who have uncovered unpleasant truths about those who issue and enforce them?

Transparency – the best disinfectant?

Today I’m going to an event organised by the Transparency TaskForce looking at the “remedies” to be applied by the Competition and Markets Authority to fix what was considered a cracked market in pensions investment consultancy.

Working, as I do, for a pensions consultancy (First Actuarial) , I must declare an interest. We don’t want to be out of work as a result of these remedies, we hope that we won’t be out of margin – my feeling is that smaller consultancies that are not dependent on fund picking and vertically integrated fiduciary management have less to lose (and much to gain) from larger consultancies who have dominated the market for as long as I can remember.

Time will tell on that: but if the CMA can present a level playing field which encourages new thinking and disrupts complacency, the result should be better outcomes – especially in DB investment management.

What questions should I ask?

I am on a panel at some stage of the day and will be asking questions of those more expert than me in these matters.

I’m interested in DB and DC asset manager margins

The market dynamics for DB and DC are quite different. DC is not dominated by consultants and margin pressure comes from the insurance platforms (and from NEST) . Where trustees and consultants dominate in DC, it is the sponsor who picks up the bill (many large occupational DC schemes pick up asset management charges).

Investment consultants have encouraged active management and have not exerted such margin pressure in DB, I have never seen evidence of the impact on DB deficits of active management underperformance (net of all costs) but evidence elsewhere (from the likes of TEBI- the evidence based investor – Robin Powell)  suggests that it has contributed to increased pressure on funding.

My experience of working with consultants on DC (when with an insurer) was that they did not exert margin pressure on us. I don’t think that there has been high margin pressure on DB asset managers (see comments below).

With regards data sharing?

The consultant’s job is to provide Trustees with advice on what to do. I think this advice should be evidence based. Funded pensions in this country have been going long enough for us to understand what works and what doesn’t.

TEBI’s approach is to build up a database of evidence based on outcomes. This is what will happen if AgeWage scores develop as I hope. Over time we will see whether the outcomes within DC are influenced by the type of asset management employed.

While thinking about what I’d ask this morning, I solicited comments from friends who know much more about DB costs than I do. Here’s one of the responses I got

The Investment Association’s standard Investment Management Agreement has a confidentiality clause which essentially prevents schemes from sharing info on charges except in very limited circumstances. My assumption is that these clauses are enforceable, and are not trumped by UK/EU law. 

This is something that’s informed my own pet theory about asset management profitability. The FCA published some data as part of their interim report on AMMS which suggested, with caveats, that the rate of profit to asset managers in DB was about 38-42% and in DC was about 11%. My hunch has always been that the prevalence of mandates with NDAs in DB is the driver of this, in comparison with commoditised pooled fund  investment which is pretty much ubiquitous in DC. Alternatively one might argue that it’s the fact that active management is holding out in DB, whereas in DC it’s commoditised passive/rules-based. Or it might be a bit of both.

Another correspondent added….

The IMA clause does not preclude the client, or the clients designated representative, from getting the data. It does preclude wider sharing.

NDAs are not exclusive to DB;  NEST has signed NDAs with managers that it employs and NDAs govern the disclosure of underlying asset management costs at other workplace pensions.

As these costs are ultimately picked up in charges that DC members pay, it is critical that they are kept as low as possible. I do not think that signing NDAs is the best way for DC Trustees to ensure competitive rates.

That said, the much lower DC margins of asset managers suggest that when negotiating directly, DC platforms are getting a better deal.

Are consultants complicit over DB margins?

But large workplace pension schemes fight their own battles (and pretty successfully).  I am more worried about the comments about DB margins.

Why do they remain so much higher than DC margins. Could it be that this is where the broken market identified by the CMA – manifests itself.

Are consultants to blame and is the use of NDAs part of the problem?

With regards “value assessments”?

The issue is exacerbated by the latest move to divorce value from the value for money equation by introducing “value assessments”. Another correspondent writes

This (value assessments) automatically diverts the attention of clients from anything to do with money or cost and perpetuates the continued misapprehension (that costs don’t matter).

My concern is that investment consultants not only permit these NDAs to survive in IMAs but perpetuate the practice because they have no wish to be accountable for outcomes. They are much more comfortable with “value assessments” than “value for money assessments” because of NDAs.  NDAs combined with Value assessments kick the benchmarking of outcomes down the road and render consultants less rather than more accountable

These outcomes are of course a result of advice given by consultants on asset allocation, style and choice of fund manager. The impact of charges on the outcomes is material and should- in the interests of competition  be disclosed.

Although the IA clause may not allow benchmarking ,of charges, it does not stop third parties comparing outcomes. My Pentech “AgeWage” scores people’s DC outcomes against a benchmark established and maintained by a trusted third party, we hope that trustees and IGCs will set the ball rolling, comparing DC member outcomes to average outcomes.

If evidence suggests that active managers are producing better outcomes , we would expect to see this reflected in AgeWage scores. Outcomes based scoring takes into account all paid costs and charges as they are reflected in – “outcomes”!

It would be possible to simulate the impact of replacing a passive manager for an active manager (with the same platform cost) and I’d hope that more of such work is done. It would be particularly interesting this back-testing being done by fiduciary managers on the active management they employ within their fiduciary management agreements.

Will consultants put themselves under NDAs when buying asset management as fiduciary managers?

Will consultants assess their value for money – not just their value?

Will the CMA allow consultants to continue to be unaccountable for outcomes – especially under Fiduciary Management?

Consultants need to be asking tough questions not concealing information.

I would suggest that they would be better off being open and transparent about the costs they are paying for the management of the money they hold under fiduciary agreements, that means refusing to sign up to NDAs  and ‘most favoured nation” assurances and putting “value for money” as the focus of accountability.

I’ll finish with some stats from Annexe 8 of the FCA’s Asset Management Market Study (now 3 years old)

Screenshot 2019-07-23 at 09.12.53.png

I do not think enough has been done to address the disparity in margins between the two institutional products examined – DC is working for owners , DB for asset managers. My question to the CMA will focus on this.

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

How are our retirement savings actually doing?


performance 2

How we are discouraged to ask the question


As indicated in the picture above, pension providers treat inquiries about past performance as carcinogenic. They do not go out of the way to tell us the value we’ve got for our money.

I wonder how many people could answer the question, “how are my savings actually doing?” in a meaningful way?

How would you answer?

  • Could you tell me the rate of return on your savings since you started making them?
  • Could you tell me whether one of your pots was working harder for you than another?
  • Even if you did , would you be able to explain why?

I think very few of us could answer those questions with any great certainty, we simply don’t get the management information we need to understand what has happened to our money.

So what do we get?

The first piece of information most of us get when asking for information is a warning that whatever we get is not going to be very useful

Past performance is no guide to the future.

This bit of wisdom is usually followed by exhortations to go talk with an expert, an IFA preferably.

Despite the Lloyds Banking Group advert telling us it is good to talk about money, there are very few people who you can talk to about your retirement savings, This is because the past is no guide to the future and any “retail” conversation runs the risk of your counter- party being deemed to be giving advice.

So what most people get when asking their provider how their pension is done is a series of numbers which they are told are no guide to the future and an instruction to talk these through with somebody who would  rather not (other than for a substantial fee).

What we get

I decided to have a quick go at finding out how my NEST pension is doing – so googled

“How is my NEST pension doing?”

I did get an answer;

Screenshot 2019-07-22 at 06.45.59

So I decided to press the link, discouragingly it took me to this page

Screenshot 2019-07-22 at 06.45.16

Being interested in me, none of these navigation options looked very interesting so I tried again and did manage to get to this message

Screenshot 2019-07-22 at 06.47.32

None the wiser – I had another go and finally – after several minutes, I found the information about how my fund was doing

Screenshot 2019-07-22 at 06.48.58

Nest has 7.5m members, I wonder how many of them could work out that they are 99% invested in a fund illustrated by the NEST 2040 investment fund. Being one of the priviledged few, I pressed on

Screenshot 2019-07-22 at 06.49.39

and finally honed in on what I was after

Screenshot 2019-07-22 at 06.49.50

From this chart I could see that NEST had done rather well over all the periods they had chosen to illustrate performance.

  • But what did this mean to me?
  • Were these figures including the 0.3% performance charge?
  • How could I work out how I was doing?

Sadly, I have no positive answers to any of these three questions. The chart seems to be telling me that I’m doing better than a benchmark of CPI +3%  and from reading through the rubric in the previous screenshots, I could see that there wasn’t a lot of risk being taken, but was there anything in all this that related to me? Even though I am an expert, I found nothing on NEST’s website to answer the question “how am I doing?”

What we get – apart from the error messages – is too high up the ladder of abstraction to make any sense to the saver at all. It is as if NEST thinks that its 7.5m savers have a financial interpreter out there. We haven’t.

Another way of telling people how they’ve done.

I currently have on my desktop, 11 requests for information signed by AgeWage investors , keen for NEST to tell them how their NEST pension is doing.

If NEST are comfortable for AgeWage to receive the information that these 11 people have asked me to have, I will get from NEST the current value of their NEST pension and a contribution history telling me when NEST got money from the person, their employer and from the Government  (which chips in with a tax-rebate).

From this data I will be able to tell that person three things

  1. How their pension pot has done  (technically known as their internal rate of return)
  2. How it would have done – if invested in the average fund (As defined by AgeWage and Morningstar)
  3. How the two returns compare, based as a single number (known as the AgeWage score)

agewage evolve 1

Advantages and disadvantages of this approach

I see the following advantages in this approach

  1. It tells people how they’ve done based on factual information
  2. It is easy to understand because it is simple
  3. It is the starting point to thinking about other things.

I see the following disadvantages

  1. It might show a low score which would make the saver sad or even angry
  2. Past performance being no guide – this number could be dangerous
  3. It requires the pension provider to do some work

Having been beavering away asking providers to give me the information , I am (unsurprisingly) getting a fair bit of pushback

  • I am not an IFA – so for some insurers I can’t be acting as agent for the person I’m doing this work for.
  • I have not got my data consent signed with a wet signature
  • The pension provider is not currently providing this service to its members

Of course we are pushing back on these objections and will get the information in the end (and in digital format as required by DPA 17).

On the other hand, several large institutions, keen for us to analyse the data of the members and policyholders whose money they are managing, are being very forthcoming and supplying us with large amount of (anonymised) data.

The big questions for AgeWage are

  1. Can we win the hearts and minds of Government to sanction this approach
  2. Can we get pension providers and their fiduciaries using big data sets to find out if they’re giving value for money
  3. Can we get ordinary people interested enough in how their pension pot is doing to go on and ask other questions
    1. Where’s my money invested?
    2. Should I be doing anything now in preparation for the future?

I don’t know the answers to these questions, but in proving the AgeWage concept, I’ve got to feel that the answer to all three questions has to be “yes”.


How are our retirement savings actually doing?

Our research tells us that people are really interested in the value of their pension pot and would like to know how it has done since they started saving.

People currently asking this question of NEST (and most pension providers) get a lot of risk warnings and then a lot of information that isn’t very easy to digest.

AgeWage wants to simplify the answer to this question so people can see if they are getting value for money (whether the person asking is a fiduciary or the owner of the pot).

If you would like AgeWage to give you an AgeWage score, you can do so as part of our pilot. All you have to do is drop an email to and I will get you a data consent form by return.

Thanks for reading this far, if you want to speak with me about this, I’d be happy to.


Oh – and AgeWage won’t charge you a penny !

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Is Direct Investment the way forward for pension savers?


It’s a third of a century since Sid spread the word about the bargain of buying British Gas shares.  The dream of a shareholding democracy flickered, spluttered and was finally snuffed out by funds.

Nowadays – direct investment in the shares of British and overseas companies is restricted to a few sophisticated investors who know what they’re doing, not the mass-market pre-occupation of the silent majority. There was a time – but the time when most of us owned shares directly is long gone.

Sid did well

Sid was born out of the privatisation of British Gas, Telecom and a number of other large state owned enterprises – which were thought would be more enterprising under private owners. So it turned out to be and by 2011 the Guardian was telling Sid and others

“Investors have actually done very well out of this, making 12 times their original stake if they have held onto their shares over the years,” he said. “A lot of people know they have the shares, but may not realise their worth. When people are trying to make ends meet, they might want to look out their certificates.”

Following later demergers and mergers, someone who bought shares in the initial privatisation could now hold shares in three companies, Centrica, BG and National Grid.

Not only could Sid see the Centrica vans and watch as the National Grid pipes were dug in, but he could sell his shares with clear instructions and pricing. The Guardian told its readers

SimplyStockbroking would charge investors £8 to sell shares through a nominee account, or 1.25% of the value of the stock (minimum £12, maximum £40) for those in certificate form.

The process should take about 10 days from the point of applying to sell the shares to getting money in your bank account.

But Sid never got involved in pensions.

If Sid had been investing a decade later, he could got his personal pension to buy his shares or he could have invested them into  his PEP (the forerunner of our ISA).  That might have saved him a little tax and helped him resist the temptation to sell his shares for a quick buck.

But the kind of personal pensions being sold (by people like me) in the early 1980s were not for Sid. If Sid wanted a pension , he joined a big company and made sure he hung around long enough (five years back then) to make sure he got a promise that would be paying him a monthly income today.

Sid went viral because of that postman, he’d probably be getting a Royal Mail pension today. The postman did not have to think about investing for his retirement then (and thanks to CDC should not have to think about it today). But Sid probably does.

Sid’s pension today

Sid – the ordinary bloke – is now in a workplace pension. Unless he works for the Government, that pension’s building him up a pension pot and is invested in funds.

Sid doesn’t know what the pot is invested in, it could be Centrica or National Grid. Infact Sid has probably never given his investment a moment’s thought. Like some of  these people.

These people generally haven’t been told where their money is going. If they could do some research they might find out their money was invested in funds but just what their funds invested in would be a mystery. Instead of getting a clear instruction – as the Guardian was giving – of how to turn funds into money, people are generally unaware of how they get their money out of a pension.

Poor old Sid. 33 years ago he was buying and selling shares and today he is being auto-enrolled into funds he doesn’t know anything about.

“Funds” have got some explaining to do.

I read during the week an article in one of the trade papers which had a video of fund managers telling each other that the Woodford thing was a lot of fuss and bother over nothing. It made me smile to see their complacency.

I don’t think the public are complacent about funds, I think they are beginning to ask some questions about these funds – which don’t tell them where their money is invested and make it hard for them to get their money back/

The people who manage these funds need to be very careful. Not only are people a lot more interested in where their money is invested (see video) , but they are not at all pleased to hear they may not be able to get their money out of these funds as easily as they supposed.

Were they to be given all the facts about the money taken out of their funds to pay management fees , they’d be even more fed up. The biggest howl of anguish over Woodford is at the news of how much Woodford is taking out of the fund to pay for his services. When they see the amounts going out of the fund, they object.

Woodford may be an exception, but to the general public, he is the one fund manager that everyone’s heard of and he represents fund managers much more than Mr Cummings at the Investment Association.

We live in a sophisticated technological world

Whether fund managers like it or not, people are going to carry on asking awkward questions about where money is invested and how much it’s costing. They are going to want to get rather better answers than they are getting at the moment. They are going to want to see their investments as Sid did and to be able to get their money back as Sid did.

They are going to want to be able to use their phones to find this information out and they will want to use their phones to change things if change be needed.

We live in a sophisticated technological world where  – should fund managers not step up to the mark – those people who understand what users want – will give them it.

Direct investment – avoiding funds – may be just what people want.


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Preparing for getting old


I am glad that I took some time out to listen to  and discuss with some great women what it means to get old. The occasion was the Pension Policy Institute’s launch of Living Through Later Life which you can read from this link. It was also good to talk with David Yeandle about growing old with MS. The first lesson I learned from the afternoon was that it is best to talk about these things. As the ads affirm, it’s good to talk about money and how it supports us as we become increasingly frail. And it’s good to find the right words to talk about the process that has us move from independent living, through cogitative and physical decline into dependence. We agreed that “Frailty” is a better word than decline.


Screenshot 2019-07-18 at 06.06.24

Women to the fore

It was over an hour into the seminar/workshop that we heard our first male voice and that only a question to the all female panel.

The event was chaired by Michelle Cracknell and the opening talk was given by Lynn Wilkinson of the PPI and featured the experience of Anna Brain . 

Anna cared for her father who was unexpectedly siezed by a stroke and became immediately dependent and her mother who became frail through Alzheimers. Anna cared for them through to death.

Once we’d digested the account of Anna’s parents final years it became clear that being prepared for what the future brings makes it much easier for those needing care and for the carer(s).

This may sound trite, but it is not discussed and it took the panel session that followed to get us fully involved. By the end almost everyone in the room seemed to have their hands up.

This was largely due to the panellists , Liz Robinson of DWP, Teresa Frietz of MAS and Tish Hanifan of Solas.

As well as the panel, the session featured Jane Voss of Age UK who shared their work

Panel at PPI.jpg

We were left with some things to think about

key takeaways.jpg

You’ll need to read the report to get the granularity behind these headlines/

For me, the issue is to get people thinking about their finances in a way that helps them prolong independence but insures against frailty.

Thinking of later life in terms of health makes planning retirement financing a lot easier. As usual, PPI have done us a service by making something obscure and difficult – relatively easy.

If you feel you are getting old, or have clients who feel that way, then you could do a lot worse than read the report and think about what it says.

Thinking about getting old is hard and preparing for it harder still. But it is what retirement planning is about and the more we practice , the better we will get

Thanks PPI

Posted in advice gap, pensions | 2 Comments

“Your pay-rise is a pension rise”


I often “wake up to money” but not to this! In a discussion about when we last got a pay-rise, one listener mailed in that her boss told her

“your pay-rise is a pension rise”

It’s the first time I’ve heard of an employee being told that their pay-rise is in pension contributions and it woke me up good and proper.

third world matters 2

There are two worlds of pensions, those who are just getting by and those who worry about things like CPI and RPI – GMP equalisation and the like.


Those two worlds crossed for me yesterday afternoon when I answered a question on twitter which I shouldn’t have

To me – powers to enforce contributions are all about individuals missing out when due money from employers (or Government) on auto-enrolment. They aren’t getting their promised pay. So I answered the question.

How I wished I hadn’t! I had imposed on an argument about DB funding between Mike (the Bazooka) Otsuka and John (Ralfebot) Ralfe on DB funding!




Because of course the one thing you don’t do is dumb down a good argument between two pensions experts by introducing things so mundane as auto-enrolment.

John was keen to deliver the coup de grace

Screenshot 2019-07-17 at 06.02.58

There are two worlds out there! There is the world of 30% + contributions going into USS and other well funded DB schemes and there is the world where a pay rise is a pension rise from 2 to 3% of AE band earnings.

Nothing could so define the difference between those two worlds as the contempt shown me for inferring that these two worlds were infact one world, that the university teacher and the contractor who cleaned the lecture theatre were equal in the eyes of God!

Third world pension problems

I sometimes wonder about the humanity of pension experts and whether they leave it behind when they go to work.

I quite often here actuaries talking between themselves using phrases like “it’s only DC” when talking of third world problems like auto-enrolment.

They consider people who survive in retirement on the meagre scraps thrown to them from the rich man’s table, as beneath their consideration.

That 40% of those eligible for pension credits don’t pick up the pay rise on offer to them, doesn’t get a mention in their Olympian discourses.

That 2m people aren’t getting the pay rise they were promised by the Government because they were put in the wrong kind of pension scheme, doesn’t worry the pension experts one jot.

But the third world matters.

We are all equal in the eyes of God and the Pensions Regulator is right to put compliance with auto-enrolment at the top of its priorities.

The days of considering workplace pensions as “only DC” should be over and it is time for the pension experts to wake up and smell the coffee.

There are millions of people in this country who are not getting the right amount paid into their pensions and they are not all in the USS DB pension plan.

If the only pay rise you get is a pension rise of 1% of your AE band earnings, you need all the care you can get.

The pensions third world matters!

third world

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Pensions for all -not just the public sector


Hilary Salt

Although I’m pleased that pension promises to the Firemen and Judges are to be extended to all public sector employees, I’m sorry for the millions of private sector employees now in DC savings plans whose reasonable expectations were for a wage for life from a DB scheme.

It remains odd that the public sector – which is supported by the wealth generated by the private sector, should have its pension system reinforced, while pension promises are withdrawn at will elsewhere.

It leads me to think that such inequality is in the long-term – unsustainable.

A best-estimates pension or a guaranteed pension

I have worked with Hilary Salt now for the best part of 10 years. I remember when joining First Actuarial, her spelling out a vision of a levelling up of pension promises so everyone could have a reasonable expectation of security in retirement from a replacement wage from their lifetime saving.

Many people talk of such things, few have made it happen. I firmly believe that had Hilary not stuck to her guns, the CDC scheme that looks likely to arrive at Royal Mail in the next couple of years, would never have been broked between staff and employer.

CDC is of course a DC plan , but its outcomes are pensions and not a pot from which a pension can be bought. For 140,000 Royal Mail workers, the outcome of their pension saving will be a wage in retirement which should meet their expectations from previous arrangements.

While the CDC scheme for the Royal Mail is a risk-sharing arrangement with the employer’s liability being capped at a percentage of salary, there is no cap on the Government’s liability to public sector pensions. The McCloud judgement will add £4bn to public sector pensions debt.

Though this extra debt is serviceable, it’s announcement comes at a time when we are holding our breath over the impact of Brexit and is bound to cause resentment amongst those who feel that they have suffered enough at the hands of politicians. I mean of course those who manage and work for private sector enterprise.

The lack of flexibility within public pensions means that pensions are now seen as part of the problem not the solution.

I hope that in the long-term, an exchange of promises – from guaranteed funding to best estimate funding in the public sector, from pension pot to best estimate pension in the private sector- will prevail.


A lifetime’s achievement from public sector pensions

The grant of a pension, whether it be guaranteed or conditional on the affordability of the promise, should be universal for UK employees. I think it should be a condition of employment and should be something which the self-employed should be able to opt in to as well.

A pension is the reward for a lifetime of work and its achievement a principal outcome of our labour.

It will be a lifetime’s achievement to  make this happen and I hope that there are young visionaries – of the intellectual stature and with the moral compass of Hilary Salt who will see this through.

Public Sector pensions can be linked to the capacity of the state to pay them and be part of a deal with the private sector that does not cast the burden of affordability on the tax-payer. Public sector pensions should be linked to the capacity of the state to pay and the decision on what should be paid , should be created from a consensus between private and public sector.

At present , the private sector have little or no say in public sector grants – other than through their limited capacity to elect politicians.

It would be a lifetime achievement to create the conditions where a more equitable second-pillar pension settlement could be implemented.  I do not see it happening at any time soon, but it is a work in progress for the young visionary I hope is out there!

A lifetime achievement from private sector pensions

I am optimistic that private sector pensions can be reinstated, as part of a DC system which benefits from lower investment costs (disinter mediated) , cheaper and more accurate administration (using distributive ledgers) and better engagement (digital communications).

When I say “reinstated”, I mean that for all people who are currently saving into DC, there can be a promise of a best estimates pension at the end of their saving – calculated using actuarial assumptions on collective mortality and implemented through the pooling of risks in the collective vehicles we are beginning to understand – CDC.

Critics will dismiss this as “waffle”, I admit I am not a mathematician and there are no numbers in this article to back up what I say. But my argument that the private sector can pay pensions rather than pension pots is based on my understanding of people’s risk appetite. I know people and I think that people will accept the risk of a market based pension solution in preference to a market based pension pot.

I do not mean that we should do away with tax-free cash which seems to me the acceptable compromise  for most people to the binary decision of pot or pension. People can have both, but the majority of a pension pot should be applied to the provision of a wage for life.

An end to the pensions of envy

My hope is that – within my lifetime (if not my working lifetime), we will see a new pensions settlement which will allow public sector pensions to become more flexible and enable public sector reward to meet the needs of a changing public sector workforce, I don’t mean by this a dumbing down of pensions, I mean a more constructive approach to risk-sharing than is seen in the McCloud judgement.

Inevitably, McCloud will reinforce the arguments agains “pensions apartheid” where the private sector envy the public sector and ultimately refuse to pay the price of public sector guarantees.

There will be more McCloud judgements, more pension strain on the UK balance sheet and more of our taxes going to pay public sector pensions. Our P&L cannot withstand ongoing stress without the elasticity of tax-payer support snapping.

Fungible and sustainable pensions – that’s what we want!

Hilary Salt  talks of the fungibility of pensions, I wrote about the fungibility of CDC five years ago. Re-reading that article I understand how a CDC scheme can survive in a way that a guaranteed DB pension cannot. Fungibility is the key to the sustainability of a private sector pension system – and it can best be achieved through best-estimate funding with a DC contribution basis.

CDC lifecycle


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Are DC trustees worth the money?



Is this how the public sees the DC Trustee’s role?

It seems churlish to take up your Monday morning with matters of pensions governance, what with the cheers at Lords, Silverstone and Wimbledon sill ringing round the country but I will!

My blog yesterday set out the case for cutting out DC trustees from the pensions body politic. I compared them to the appendix in the human body that does little good and occasionally does a lot of harm. We all know about the  acute harm “trustees gone wrong” can do , but they are few and far between, but I’d like to focus on the chronic weakness of DC Trusts and why we have to ask the same question of trustees as we do of other parts of the pension schemes

Are DC Trustees worth the money?

What do DC Trustees cost?

I don’t know, and I wonder if anyone has actually done a proper estimate of the cost of running a DC board. It will of course vary according to scheme size, but the simple logistical costs surrounding convening four meetings a year are substantial. Consultants, investment managers, lawyers even actuaries, attend DC meetings. Most are on hourly rates , most claim travel expenses and that’s just the start of it.

Increasingly trustees are expected to be reimbursed as professionals – independent of the scheme. This is right and proper, there can often be savings by having professionals on the board, where those professionals reduce the need for external consultants. But all too often the paid trustees result in ever more consultancy and I say this as a consultant.

How is the cost met?

The answer is that it’s met by the scheme sponsor, by the employer, unless the trust board is acting for multiple employers, in which case the cost of the governance is spread and so diluted that it becomes a part of scheme expenses and loaded into the annual management charge – in which case trustee expenses are met by the member.

It would be wrong to leave it there. The cost of running an own occupation DC scheme where the employer sets up , manages and pays for the trust board, is ultimately met from a pensions budget. Were this money not spent on governance, it would be available to boost employer pension contributions. It would be naive to think that ultimately there is a difference, the cost is always met by the member and the member should be asking, is the cost worth it?

Why don’t members query trustee VFM?

The short answer is that that question has never been asked (to my memory). There is no accountability amongst DC trustees to the people they serve. When a Chair writes a statement on value for money, he or she does not have to assess the trustee and the trustee retinue. The emphasis is on what members are getting for their investments.

But maybe this is wrong. If members knew that contributions from the employer are reduced to meet the costs of the trustees, they would legitimately ask whether the trustees were worth it. They might also ask why the scheme they were in needed its own trustees and why it might not be part of a multi-employer scheme where the work was done once for hundreds of sponsors.

We neither know the costs of trustees or the impact of those costs on scheme funding rates. Since the common mantra amongst trustees, sponsors and consultants is that we need to get more money going into pensions, wouldn’t an examination of the money lost to fiduciary management, be factored into the equation?

Members should be questioning what the cost of having their own trustees is and what that means in terms or reduced outcomes when they come to take their pot.

What is the value of DC trustees?

I expected push back on my assertion that DC trustees add about as much value as the human appendix.

I would expect trustees to be supported by Ian and his fellow consultants, they are part of the fiduciary ecosystem – paid for by sponsors out of trustee budgets or directly by sponsors as trustee support.

What the Pensions Regulator is consulting about, albeit in a rather pussy-footing way, is whether we are maximising the value of trustees.

My blog of yesterday was not an attack on individual trustees, who are individually very good, but on the collective value they give to DC savers. I use the word “savers”deliberately, trustees have all but given up on helping people to spend their savings.

As regards investments, the cartoon at the top of this blog suggests the public’s awareness of what DC trustees do with regards investment decisions. In my experience they put themselves in the hands of their platform managers and consultants, the amount of conviction-based trustee decision making on investments is woeful- as witnessed by their collective failure to adapt defaults to a modern world where responsible investment is the member’s primary requirement.

Nor are Trustees the champions of the user experience as their trade bodies might have us believe.

Trustees, who should be at the forefront , lag at the back when it comes to helping people move their money around. Four of the five named DC providers operate exclusively through occupational pension schemes, the fifth – NOW Pensions, employs JLT- now a part of Mercer. 

Screenshot 2019-07-15 at 07.35.36.png

By refusing to join Origo, the consultancy TPAs are putting their customers at the back of the queue, they are also at the back of the queue for pension dashboard adoption. Far from being a the cutting edge, trustees are presiding over administration which is decidedly 20th century.

My conclusion yesterday is my conclusion today. That trustees are by and large busy doing nothing.  By “nothing”, I mean nothing that couldn’t be better done by switching to a master trust or abandoning members to insurance company group personal pensions and the protection of IGCs.

DC trustees may not be adding enough value to justify the expense of maintaining them, at least not in the numbers of DC trust boards that survive.

Even modern master trusts are not exempt from scrutiny – I take NOW as an example of a Trustee Board that has had to take account of itself and move with the times. 

Compare and contrast the shape of their trustee boards 18 months ago and today.

This change did not happen organically, it happened at the Pensions Regulator’s demand. 

NOW Trustees

The NOW trustee board in October 2017

I think there are very real accountability questions for NOW pensions and I hope that  Joanne Segars  will work with her new board to get NOW back on track.

The new Trustee Board (below) is there because of Government intervention. I suspect that such interventions will become increasingly common.

Trustees cannot be allowed to fail their members – and that is what is happening in many schemes today.

Screenshot 2019-07-15 at 06.56.09.png

NOW Trustee Board July 2019

What is the benchmark for value and money?

As the FCA  keep telling us, there has to be something to compare trustee costs and value to. In the case of single employer occupational trusts there are two benchmarks, one is the work of master trust boards and the other the work of insurance company IGCs. While neither are doing exactly the job of a single employer trust, there are enough similarities for tPR ,DWP and FCA to make some meaningful comparisons.

I mention these Government organisations because they seem to me the only independent arbiters of the questions raised in this blog. Expecting trustees to determine for themselves the value they offer for the money they cost is unfeasible. It is unfeasible for consultants or the PMI or the PLSA or AMNT to opine independently.

This is where Government needs to exercise its role as an independent champion for the consumer and if they can’t work out what the VFM of trust boards is , then they should get the OFT and even the CMA in.

We need greater accountability and proper VFM benchmarking of our DC trustees.

A very specific inquiry

I do not want to conflate here the roles of DB and DC trustees. DB trustees have a quite different role to DC trustees. They are responsible for the funding of scheme promises.

DC trustees have no responsibility for the outcomes of DC pensions which is the existential threat they face. They simply have no proper role.

I believe that in challenging DC Trustees as I want them challenged, we will see them having to find a new role. It could be that they want to take on the challenge of helping members provide themselves with a Wage for Life, in which case they should be pushing to upgrade the scheme to CDC. It could be that they hand over their responsibility to a multi-employer mastertrust of GPP (and its IGC).

Either way, doing nothing is not an option. In an ideal world DC administration should be part of the blockchain, DC investments should be managed as NEST manages them. In an ideal world, DC members should have control over their money with the ease and precision they get from internet banking. There are examples of good practice in all areas, but by and large DC schemes are lagging and lagging badly.

In my view, DC Trustees are holding the member’s user experience back. That is the argument that I will be presenting to the Pensions Regulator in my response to its consultation and I look forward to pursuing this conversation with anyone who choose to challenge that view!

This is a very specific inquiry. I would like to feel comfortable by the end of this year, that it gets a very specific answer.

Are DC trustees worth the money?

Now certainly thought so back in 2013


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

The DC Trust – a pension appendix

appendix 3

The appendix

Nobody knows exactly why we have an appendix, but removing it isn’t harmful. Appendicitis typically starts with a pain in the middle of your tummy (abdomen) that may come and go. (NHS inform).

I feel much the same about most DC trust boards. We have DC trusts because occupational pension schemes are governed by trust law, but just what DC trustees do remains a mystery to most of their members and – I suspect – to the Pensions Regulator.

Once a year , they are required the chair is required to write a statement telling us what is being done to get us value for money, ensure our money is managed with due regard to Environmental, Social and Governance considerations.  But with the exception of exceptional trustees (Rene Poisson at JP Morgan springs to mind), hardly anyone could name the people who act as fiduciaries for their money.

Like the appendix to the large intestine, DC trusts are legacy items that in time will wither away, their passing unlamented as their removal  painless.

The action is elsewhere

My investigation into the location of the appendix also brings up interesting parallels.

It’s connected to the large intestine, where stools (faeces) are formed

No one is saying that the appendix produces faeces, but it’s proximity to the large intestine suggests that it might once have power over the output of our tummy.

If DC trustees could give their members advice, they might still stop people taking crappy decisions.

If DC trustees were allowed by their sponsors to offer help in spending money, they might be more than pension’s equivalent of  “a small, thin pouch about 5-10cm (2-4 inches) long”.

But the action is elsewhere.

People who want a pension from their DC pension scheme can no longer get one from the scheme, they have to buy an annuity.

Instead of bringing retiring members together and offering them the opportunity to pool mortality, DC trustees have given up on what they call “decumulation” altogether.

As for helping members understand their value for money, DC trustees are paralysed by the “risk” that if they told members how they’d actually done, some members might not be happy and blame the sponsor or even the trustees for not doing their job properly.

And while trustees “embrace” in principle, the idea of ESG, only a handful have actively changed their default fund to ensure members get its benefit. Indeed many trustees still talk of ESG as a risk rather than a means of risk reduction.

The action is elsewhereTaps FCA


Inept and out of touch

Inept and out of touch, most DC trustees have little to do but turn up at trade shows and sit through worthy presentations by consultants and fund managers selling them services that they purchase to get further invites and (if they are lucky) a golf day or two.

The actual decision making within our large DC schemes is being taken by the manufacturers – the fund managers and the providers of investment admin and communication platforms that the trustees meekly purchase and oversee.

So as I contemplate responding to the Pensions Regulator’s latest consultation on DC trustees, I wonder whether to tell them what I think , or what the pensions industry wants them to think?

To tell tPR what I think would risk the wrath not just of the trustees, but of all the mouths that suck at the trustees underbelly.


To tell tPR what the industry want tPR to hear , would provide me with a cosy job and perhaps a few DC trust position of mine own. I could feather my retirement nest by being paid for being at best ineffective and at worst inept.

What would you choose if you were 57 ?

Reform or removal?

IMHO, 95% of DC trusts are useless and the 5% that are useful are multi-employer. Occasionally DC trustees go bad, like appendices, and have to be cut out and replaced by firms like Dalriada and Pi who specialise in recovery work – sadly usually at the member’s expense.

The concept of an occupational DC scheme for the staff of a single employer is an anachronism. It’s a hangover from a time when DB schemes really were part of the company’s ecosystem and not a risk to be managed out. DC trusts have long since lost any meaning and – save for rare schemes like HSBC’s staff scheme- have demonstrated zero appetite to evolve to the changing needs of today’s member.

So I thoroughly support the process of consolidation that is seeing employers participating in multi-employer occupational DC trustees or just hand things over to insurers with fiduciary management coming from IGCs.

I don’t see much point in the Pensions Regulator’s consultation other than it informs on action that is happening elsewhere (the much more cogent work going on in DWP and at the FCA). The Pensions Regulator should stick to the task of facilitating consolidation , removing (not reforming) DC trusts.

Appendix 2



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

Time to tackle pensions tax

Screenshot 2019-07-11 at 11.32.15.png

Pension taxation isn’t working. It is benefiting those who find it easy to save and not incentivising those who don’t. It is causing doctors to work below their peak capacity and demanding up to 25% more in contributions from our 2m lowest earning savers.

It is creating confusion amongst those moving from saving to the spending phases of their retirement savings. Pension taxation is – as Liz Truss says- “too complex and could do with simplifying”.

Some might say she is kicking the can down the road when she says it is a job for the next Prime Minister. I take that comment to mean that finally reforming pension taxation should be a priority for an incoming leader and something to be dealt with before the next general election. That puts reform at the top of the political agenda (as Jo comments).

A group of us, Chaired by Baroness Ros Altmann, is determined to help the cause of pension tax reform. Reform cannot come too soon, not just for the higher earning doctors but to millions who pay pension contributions but are denied their promised incentives.

More than just doctors

Yesterday I went back to the last pension tax consultation which began in July 2015 and petered out in the run up to the Brexit referendum early the next year.

You can read the consultation here

It’s entitled “Strengthening the incentive to save” and is quite clear about what the incentive to save for those auto-enrolling will be.

1.24 Average contribution rates will rise as the minimum contribution levels under automatic enrolment increase to 8% in 2018 (of which the individual will pay 4%, the employer will pay 3%, and the government will add tax relief of 1%).
However, it is still important that the right incentives are in place to support individuals to take responsibility for making sufficient contributions to their pension to meet their expectations. That is why the government is considering how it can go further to ensure that individuals are supported to save.

The Treasury’s policy intent is clear. The Government will put in 1% if the employee puts in 4% and the employer 3%. There is an intent to go further but no commitment.

Rather than see through the policy, two things have happened
  1. The date of the move to 8% of band earnings was delayed to early 2019
  2. Up to 2m low earners are not getting the promised 1% and are thus paying 25% too much by way of contributions (5% and not 4%).

Instead of doing more, they have done considerably less than they promised. I suspect there are reasons for the Treasury’s failure to deliver , but that those reasons aren’t “good”.

The Treasury’s estimates of the number of new savers by now proves to have undershot actuality by 15-20% (10.5m rather than 9m). AE has been more of a success in terms of inclusion than anyone dared think. But greater pension savings lead to lower Treasury revenues which is why the Annual Allowance and Lifetime allowance have been brought in. There is an explicit link in the 2015 paper.

The lifetime and annual allowances were introduced at ‘A-day’ in 2006. They were originally set at £1.5 million (the lifetime allowance) and £215,000 (the annual allowance), and were designed to ration the  amount of tax-privileged saving an individual could make into a pension. By 2010-11 they had risen to £1.8 million and £255,000 respectively.

Over the course of the last Parliament, both limits were gradually reduced in order to manage the growing cost of pensions tax relief. The annual allowance is now £40,000 and the lifetime allowance is £1.25 million. However, it was announced at Budget 2015 that the lifetime allowance would be reduced to £1 million in April 2016, and then uprated by the Consumer Prices Index from April 2018.

Complexities such as the Money Purchase allowance (stopping recycling) and the Annual Allowance Taper (a kind of pension super-tax) are additional to the core AA and LTA legislation outlined above.

Not to put too fine a point on it, the Treasury underestimated demand for tax-relief and appear to be balancing the books by not paying it (to those who need help most).

Pension taxation policy intent is to take from the haves and give to the have nots. We know from the state of today’s NHS waiting list that the taxation of the well off has succeeded not just in reducing Doctor’s pensions, but in their willingness to practice.

We also know that the money that they are paying to the Treasury through Scheme Pays or directly (via self assessment) is not going as it should to incentivise the lowest earning into saving. Instead the low earners are paying more than they anyone else to save (as a proportion of their net disposable income).

Impact on saving

In February, This is Money ran an article on the high-opt out rates among young low-earning NHS staff .

Why are NHS staff quitting generous pensions at an alarming rate 

The research it drew on concluded that young staff were being asked to pay too much for a benefit they didn’t understand.

There are .. fears many NHS staff feel unable to afford the pension contributions.

Nearly a quarter of a million active members have opted out in the past three years, a Freedom of Information request by the Health Service Journal found.

NHS workers aged 26-35 are most likely to leave the scheme, with some 30,000 doing so in 2017.

The research focusses on the affordability of saving

A typical nurse on £25,000 a year currently has to pay a contribution of 7.1 per cent before tax relief so saves £1,420 by opting out of NHS Pensions, according to Royal London figures.

This suggests to me that there is a point at which pension contributions become too expensive and that the assumption that 2m low earners will continue to pay 5% rather than 4% for their pension contributions is a dodgy one.

For low paid NHS workers , auto-enrolled into the NHS pension schemes without tax-relief , the cost of not getting the basic rate tax incentive is 1.42%, which is a lot of pay if you weren’t getting pay increases.

The Government should not be complacent, there is a point at which savers can save no more and it’s not just consultants who have reached it.

So it’s time to tackle pensions tax

The 2015 consultation points out that “Over two thirds of pensions tax relief currently goes to higher and additional rate taxpayers”.

It also hints at an emerging problem which has grown since 2015 with the phasing of auto-enrolment contributions.

Increases in the Personal Allowance in recent years have also led to a decrease in the share of pensions tax relief which goes to those with an income below £19,999.

I suspect that the Treasury knew even then that the squeeze would come both at the top (AA and LTA) and at the bottom (through the failure of net pay to pay the promised tax incentive to lower earners.

Let nobody think this will be painless.

The group of people who stand to lose most from change are those who benefit most from the current system. They are the mass affluent who don’t get hit by the AA and LTA and get the bulk of the “two thirds of pension tax relief”.

Restricting their lucky status by moving towards a flat rate of relief or even TEE would be extremely painful. It was too painful for Osborne and Cameron in 2016 and it may be too much for a minority Government in 2020-21.

But this bullet must be bitten if the pension system is to retain fiscal credibility. We cannot go on as we are and it’s clear that the Government know it. Liz Truss is not the only person who wishes to take up the Doctor’s grievances, future prime ministers are saying the same/

It’s a shame they aren’t saying the same for the have nots, who are being so badly failed today.

net pay

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

Drivel is Drivel – whoever says it

I read articles by Jack Bogle and Warren Buffet and John Kay and Terry Smith because I like to understand how money can be managed on my behalf better. I like to improve my understanding.

And occasionally I read drivel.

I have just read the most stupid article on asset management. You can read it here.

Its author describes himself as

A leading professional trustee who knows stuff and gets stuff done in pensions, investment and governance.

That is indeed the case.

The author, Richard Butcher has been chair of the PLSA, a member of the IDWG, he’s a Governor of the PPI and Managing Director of Pitmans Trustees Ltd.

He is undoubtedly a very influential man and gets a lot done;- and yet he trots out total drivel.


Here is the central thesis of the article. The author suggests we are walking the plank

I’ve drawn this picture to help to describe the plank.

The blue line shows the shape of the normal economic cycle. The economy and market – albeit on a slightly different time frame and in a more volatile manner – falls, bottoms out, grows, peaks, falls and so on, ad infinitum.

The red line shows what has happened to the economy and market recently. It has continued to grow. We are on a plank.

Now, as sure as eggs are eggs, we will fall off the end of the plank at some point. There’s just no telling when.

Why is this relevant to the active v passive debate? Because of the rule of thumb in the Pensions Insight blog . Passive funds tend to do better in rising markets, active funds better in falling markets. The conditions for passive funds have been benign for an unusual length of time.

There is no evidence for this sweeping statement. It is purely based on the personal prejudice of the author.

And there is no evidence to confirm that passive funds produce better outcomes than passive funds in rising markets or that active funds produce better outcomes in falling markets.

But this cod logic comes up with a conclusion

So yes – over recent past passive funds in general have probably done better than active. The argument, however, will swing at the point we fall of the plank. (sic)

Probably? Has the author looked at the evidence?

About the only consistent data there is , is that the more you allow a fund manager to take money out of your fund to manage it, the less there is likely to be when you want your money back.

The evidence based investor Robin Powell, has assembled a massive archive of evidence that demonstrates conclusively that active management does not deliver good outcomes.

Here is his most recent article on the subject and here is a comment from a former active manager who is convinced by the evidence

Screenshot 2019-07-11 at 06.51.48.png

Which is why most fiduciaries do not take risks with other people’s money and stick with passive strategies.

Where we can employ asset management is to improve governance , asset managers can improve governance without trading stocks – and they do. If asset managers stuck with ensuring the assets they managed – were managed better – then they would be worth their salt.

Many passive managers – like LGIM and Hermes do just this.

The plank

But this is not what Richard Butcher is talking about when he offers us his very general rule of thumb;- that in a rising market passive funds will do better whereas in a falling market active funds will prevail.

He calls on fellow trustees to

“be agnostic in the debate. Their strategy should be based on investment objectives rather then (sic) personal prejudice. One challenge for trustees, however, is to find dispassionate advisors”.

Even when we are walking the plank?

In a short article the author displays his personal prejudices, calls for dispassionate behaviour and tells us we could be walking the plank (without an active management safety net). Trustees should be both agnostic and evangelical, starting with passive and ending goodness knows where.

All other things being equal, which they rarely are, trustees should be agnostic on the philosophy but evangelical on costs. In other words, passive is the proper starting point.

Whatever principle survives this bizarre conflation of  arguments is finally exposed as secondary to the whims of sponsors.

” in a defined benefit world, it is the employer who bears the costs of our (trustee) decisions. This means that they should have a say, assuming their covenant is up to it, on investment approach. We may decide on balance to go passive, but if they want us to go active, for whatever reason, and they are willing to pay for it, we should go active.

I do not normally  read drivel , I read this only because a friend sent me the article with the following comment

How does he get away with writing such shit?!?! The guy understands nothing. In any given day, wherever the cycle, soaring returns, bumping along or plunges, there is a benchmark return. There are passive traders in the market and active traders. The passive traders return the benchmark minus low fees. The active traders in aggregate return the benchmark minus higher fees. The end.

Whether the markets are rising or falling, in aggregate active returns less than passive. Why is this so hard for people to understand?

I think we just need to take a deep breath and recall that this jerk is being paid £1000/day by pension scheme members to be lazy, stupid and wrong. And he is the chair of the trustees’ trade body.

The answer is that Richard Butcher gets away with it because no-one calls this drivel- drivel.

Richard is a first class operator but he is not a strategist. He should stick to the knitting and not design the patterns.



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The value you get for your pension money

Independent help for all pension savers

I started yesterday in the swanky new film studio under the FT’s Bracken House. It had to be built on stilts and sound and vibration sealed as the district line runs right below it. As you sit on your sofa, cameras wheel past you driven by an unseen hand.

All this to explain to subscribers to FT Ignite , why IGCs and DC Trustees do matter and that they can make a difference. I look forward to sharing whatever comes out of the session- though I may be constrained. My key point was that IGCs and Trustees are responsible for protecting members from harm (however inflicted).

We talked of Fidelity’s default workplace pension fund that has  transaction charges that more than double the AMC. We talked about Woodford and the role of the Hargreaves Lansdown IGC in protecting workplace pension savers.

And we talked about value for money scoring for pension savers.

From zero to hero – the Hargreaves Lansdown IGC report

Trouble at stables

Hercules 2

I wasn’t anticipating continuing this discussion later in the day but with typical candour, Richard Butcher shared with us his frustration with having to make value for money disclosures.

We know that Richard doesn’t think cost disclosure worthwhile, from the laissez-faire attitude he adopted in his IGC Chair’s statement for Old Mutual. The pendulum has swung and 70 pages of disclosure later, Richard may feel he’s proved his own point.

Legal & General threw the kitchen sink at the problem in their 2019 IGC Chair statement. Where Trustees or workplace pension provider offer 200+ choices for members, they necessarily burden those tasked with fund governance with 200 times the data and 200 times the trouble.

As most workplace pensions are unadvised, the IGC or Trustee is the only independent source of expertise the policyholder/member has.

The message to those managing the fund platforms must be simple. If you want to offer every fund under the sun, there is a price to pay for it in extra governance and that means paying Richard Butcher and others to clean the Augean Stables


Should we ban fund platforms from the workplace?

It’s easy to argue that we should simply ban fund platforms from workplace pensions and go back to a small but well governed range of core funds with an intensively governed default. This would be regressive,

Hargreaves Lansdown’s workplace pension platform (Corporate Vantage) is well regarded by employers that use it. It would be interesting to know how many policyholders accessed the Woodford World Equity Fund through the corporate plan but (judging by policyholder behaviour elsewhere) I doubt many. In any case, pension savers have less need of liquidity than most.

The IGC may want to have a conversation with Hargreaves Lansdown about red flags, and if they can’t get assurances that HL is managing the risks on the platform, then the IGC should be thinking very carefully about what funds to expose vulnerable policyholders to.

This is a question that the FCA may well be addressing as part of its IGC review which is kicking off this summer. I do not think that we should be throwing the baby out with the bathwater but I do think that employers who select a spectacular fund platform for a workplace pension, need to justify that decision. IGCs have an important role to play in discussions with employers who have not taken advice on their choice of workplace pension and are offering wider fund choice.

Why RAG is just bull!

I cannot agree with Richard Butcher’s assertion that members can be given a series of traffic lights based on the Trustee or IGC’s opinion.


I am with Ian McQuade – people need to know the value for their money, not a pronouncement from Olympus!

While Richard Butcher’s approach ticks all the boxes for the provider, it offers the saver nothing but “save more”.

People need to know what they are paying for and what they are getting for it. In the crudest sense, they need the equivalent of a till receipt.

A better way

Ruston Smith and I see eye to eye on most things, but especially on the need for simple statements that policyholders and members can read, digest and act on.

The Ruston Smith simplified pension statement, co-designed by Quietroom, shows what can be done on a single sheet of paper.

Ironically it is currently banned from showing the cost of pension management in pounds shillings and pence terms by (amongst others) the FCA. Apparently telling people the price of what they’ve bought might stop them buying again.

Ruston can’t provide a till receipt and instead has to pack the statement with words. The two pager has still a long way to go to the simplicity of a Tesco till receipt!

Simplifying pensions

We all think that value for money is very hard to explain. By “we”, I mean pensions experts. But for the ordinary person it is a very simple concept, he or she gives you the money and the amount you give them back shows your value.

agewage evolve 1

An aligned approach is the one I am pioneering at AgeWage which shows people how their money has done in a single score.

It works by analysing all the money that has gone into a pension savings account and compares that with the money is available to come out (contributions and net asset value).

Such a comparison can tell people the return or interest they’ve got on their savings. But that number is meaningless unless it can be compared with how the average person has done.

The AgeWage score is simply an expression of this comparison. By reinvesting contributions in the average fund we can compare one return against another and score people’s outcomes with a single number.

Why scoring outcomes is the way forward

This simple way of scoring outcomes is the only way I have found to give people what they crave, an accurate, un opinionated measure of how their pension saving has actually done. It is a way of giving people the value they’ve had for their money.

It is not the end of the story, infact it could be the beginning.  For many savers, it may be the only number – other than the amount in their pension pot, that seems clear vivid and real to them.

But there is in AGE an acronym that we’re adopting which allows us to take people further down the road to pension enlightenment!

A – assist- we need help with VFM

G- guide – we need a path and guide

E- equip – we need to tool-up for later age

If we can give people a proper view of their past saving and how it’s done, we can at least get some  to the next stage – a path and a guide. We might even equip them to take hard decisions on how to turn their savings into an AgeWage – an income for life.

Scoring outcomes is what Richard Butcher should be doing, not delivering a 70 page appendix to his Trustee Chair Statement.

Adopting AgeWage scoring is what Ruston Smith and Quiet room could do, to show members how the value they’ve got for their money , compares with the average.

Employing AgeWage to provide the guidance and equipment going forward, may be a next step for Trustees and IGCs, though I suspect we will have to do an awful lot of scoring before we get that far!

Finally an offer

If you’d like to have your pension pot (s) analysed by AgeWage and be given your own AgeWage score (or scores), you just need to mail me

If you have already done this – I will be writing to you today (Weds 10th July).

We can’t promise we can get you a score as not all providers will co-operate, but we think it highly likely, given some patience from you, that we’ll get your score to you by the end of August!

Getting scores online is what we aspire to – but you have to start somewhere and this is where we start!

AgeWage evolve 2



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Giving doctors a break

NHS choice

“82% of consultants say they are are or are planning  cutting down on work” – Dr Tony Goldstone

You can listen here to Dr Goldstone explain the issues facing doctors who find themselves on the cliff edge of taxation and all too often trigger unnecessary bills – ensnared by the complications of the annual allowance taper.

His comments on some doctors facing tax bills of up to £80,000 and having to re-mortgage to pay them have fallen on the incredulous ears of pension experts.

Liz Truss speaking in parliament (see video below) was “in no doubt that the pension taxation system is too complicated”. But Doctors , patients and the NHS have not got time to go through the series of consultations that would lead to a permanent solution.

It really doesn’t matter how the big bill is explained, the matter has now reached that point where the BBC, Sky News, the Guardian and the FT all ran the same story on the same day. In a world where the story is in the sentiment, the sentiment is clearly on the side of the doctors.

One of the many compensations for spending three days on an NHS ward was that I met quite a few consultants who wanted to have a chat about their affairs.

The consensus view was that no matter how much doctors cared for their patients, they cared for their families and their private time as well. The economic interest of the medical profession is not served by working for nothing, The tax-rules are wrong and the taper is causing the problem- not the doctors.

A failure of taxation policy which must now be admitted.

Whatever our feelings about high earning doctors (and I am not one to begrudge doctors high earnings), we cannot call what they are doing “industrial action”. It is “inaction” – it is not industrial – it is “social” behaviour. Doctor’s are choosing to spend their time differently to the way they were because they are so discouraged to work weekends/

As Prospect point out – this is not an affordability issue for Government

The matter was debated in parliament (to know great effect by the look of this video) The question is tabled at 16.22

Which leads to three questions

  1. When will the Government sort this out?
  2. If they sort out the doctors, why not those on low earnings who don’t get promised pension savings incentives?
  3. And when will they do something about the 40% of potential claimants not getting their pension credits?

We will soon have a new DWP, Treasury and DHSC team

Let’s hope that a new Government will do more than wring its hands over Brexit and start governing in Britain again.

The lack of action on these pensions issues over the past few years has been scandalous.

A new Chancellor and Secretaries of State at DWP and the Department of Health have an immediate agenda , to cut hospital waiting lists, make pension saving worthwhile for low-earners and to alleviate poverty for those in later years.

The answers to these issues may require a redistribution of pension tax-relief (as proposed in 2015). The ideas under consideration then should be picked up, dusted down and implemented without more ado.

This is clearly now a political issue.

But can our politicians get their heads around the problems they created?



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

Cyber-power; is Facebook our new Government?

cloud server platforms

When your bobbing up and down on the Thames in a wooden boat for a few days, it’s difficult to imagine how tech platforms are changing the world, but returning to terra- firma and reading “the Fracturing of the Global Economic Consensus” by Rana Farooha, I got a significant wake up call.

The article ends where I begin.

As one participant replied when I asked if he thought Facebook chief operating officer Sheryl Sandberg could still run for US president one day: “Why should she? She’s already leading Facebook.”

The capacity of technology platforms to take on aspects of Government is spelt out.

A few digitally savvy participants saw Libra (Facebook’s cryptocurrency) as only a first step into areas where governments (at least in the west) haven’t been able to effect change. Facebook could, conceivably, provide online education, or become an employment platform for legions of workers in a new global gig economy.

and the article talks of territories,  quite the opposite of cyber terrorism.

One participant, pointing out that liberal democratic governments simply can’t move fast enough to keep pace with technology, wondered whether “technology platforms might be the new Westphalian states”.

The rise of cyber-power

The ability to talk to and influence the population is something that liberal democracies have aspired to and achieved over the last 200 years. But they are now having to compete with Facebook, Linked in and Twitter as authoritative.

Indeed these platforms have forced Government to use them. Trump is a slave to twitter not the other way round.

And these platforms are American looking at  a regional breakdown of the equity market share of tech platforms — 70 per cent in the US, 27 per cent in Asia, and 3 per cent in Europe.

In terms of geo-politics, China has still a lot of catching up to do, but America’s geo-political advantage only translates into economic power if the US treasury can properly tax what its stock exchanges support.

The real power of the tech-platforms is with the likes of Sheryl Sandberg.

What does this mean to you and me?

As I look at politicians trying to be popular, I see populism destroying the aura of Government. If I walk into a Government department or even parliament and see an eminent politician, that eminence is usually tarnished by their participation on social media platforms.

Western Politicians are in hoc to social media and exposed to ridicule when they try to be popular on it. By comparison the Chinese political system (control and command) gives no such freedoms and may never embrace the social media platforms, watching how it is devaluing politics and politicians in the West.

I wonder whether in ten years time, I will be looking back at the article in the FT (and my reaction to it) and thinking “prescient”. Or will we see the rise of social media in the West as a bubble that burst – returning politics and economics to what many of my generation consider “business as usual”.

Oddly, this means a lot to me and you. Instead of being observers we are in the thick of it. What we say, observe and regurgitate shapes the prevailing consensus. If we chose to stop using social media, all cyber-power could be turned off.

Is that going to happen? I struggle to think of how it could.


Meanwhile – back on the water


Not all unicorns are “cyber”


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HR and the decline of empathy


I wrote to my HR department to tell them I had had some emergency treatment. What I got back surprised me, an admission that they knew nothing about it – contractual sickness terms  –  and a sign off that reads

Please let me know if I can do anything else to help at this stage and I hope you are soon back at work.

From “Welfare” to “well being”.

It was not that long ago that “staff welfare” was the #1 priority of HR departments, now they seem to be a risk mitigation function ensuring companies cannot be sued by employees with an eye to the main chance.

Compliance with IS 9000 is a KPI for our company so when staff “fare badly” , they become part of the risk-register. In this blog I argue that process cannot has to put staff welfare – nor corporate risk mitigation as its focus.

Staff welfare or “well-being” as it’s now been rebranded, is a very simple concept that does not require a 900 page staff handbook and a battalion of lawyers. It starts  in sympathy. As sympathy is no longer in the HR lexicon let me remind myself what it means

“feelings of pity and sorrow for someone else’s misfortune”.

You can express sympathy but not be believed, to be believed you have to show “empathy”. Empathy can be defined as

the capacity to understand or feel what another person is experiencing from within their frame of reference, that is, the capacity to place oneself in another’s position”

It is not enough to have sympathetic thoughts, there needs to be more, you need to see and feel things from someone else’s point of view.

When we commoditise welfare – we get to well-being, a “measurable” that turns HR into a branch of risk management. Welfare is more than can be achieved through process; HR due process is an abstract notion linked to productivity and compliance.


The real problem with HR as risk mitigation

Sympathy is easy, you can cut and paste it from any HR manual, but empathy is hard, it’s dead hard – because it means trying to understand where someone is coming from.

The compliance approach to HR assumes that staff are always coming at an issue with a wish to escalate for personal self-gain. If the assumption is that behind each mail or letter there is an ambulance chaser then the chance to see things from your staff’s point of view goes out the window. The mail I got from HR read like a legal disclaimer and I guess that it did a good job of protecting the company’s position.

But it made me feel mad! I’m already back at work- I never left work. I love First Actuarial , I don’t want to bend the rules! I’m a Director, I have duties to my company!

I didn’t need a lecture but I got one

“You’ll appreciate that under such circumstance we will offer as much support as is possible but our contractual sickness terms apply to all employees”

The real problem with “HR as risk mitigation” is it makes  worried and scared people even more worried and scared. It puts up the barriers turning sympathy into hollow words. Empathy has no chance – this is all about them and nothing about you.

Personnel means people

I didn’t want a lecture, I wanted a cuddle. I wanted someone in my company to give me sympathy (with empathy).

And I am sure up and down the country, people are reading this and asking the same question. Whatever happened to staff welfare, to the personnel officer to the  “get well soon card” or similar.

Nowadays, that empathic sympathy comes through social media where people feel free to issue an emotional response to situations without fear of litigation.  Thanks to all – most especially to Gareth and Andrew for the kind gift!

It is a shame that companies feel unable to do staff welfare but I fear that is what has happened,

Personnel used to mean people- now people are a commodity – a human resource employed to maximise profit. Yet the companies in Britain that have survived longest, have done so because they look after their people.

I think of Bournville, Port Sunlight and I think of WeWork – these are places where the basic principles of looking after each other emanate from work.

Personnel means people and can still mean people. I know our HR people they are great. But they shouldn’t forget that for all their accreditations, they are about staff welfare and there are times that even ISO 9000 falls short.



Posted in NHS, pensions | Tagged , , , , | 7 Comments

They shall not grow old!

nigel and sheila.jpg

Yesterday I wrote about how 40% of those who could claim pensions credit don’t. Today I’m writing about Nigel and Sheila, my boating friends who have a related problem. Nigel is 75 in a fortnight, has been deferring his defined benefit pension but has been told that whether he likes it or not, he gets his pension from his 75th birthday.

A little bit about Nigel (and his remarkable wife Sheila). Nigel is curator of wood for the Victoria and Albert Museum, he is still working and Sheila tells me that when he gets home after a full day, his first thought is to walk the dog and second to mow the lawn. Nigel is a remarkably fit man despite having been ravaged by cancer earlier in what most of us would call his later years.

Nigel and Sheila have a large family with whom they share their boat, they are never without a smile on their face (even when Sheila had a boating accident and broke bones she never moaned).


It’s an overworked phrase. Nigel and Sheila have it and they people who spend time with them – see it rub off on them.

I don’t know how to advise Nigel regarding his pension. I am quite sure that he sees this influx of unnecessary money as a nuisance but I’ve tried to convince him that there will come a time when even he will look for a wage in retirement.

He doesn’t seem to comprehend the idea of stopping work, explaining to me that that would be like a death sentence.

Let’s celebrate getting older

In a week when the prospect of getting older looked a little dim, Nigel and Sheila are my role models and mentors!

I think we can look up to older people in this way (there is less than 20 years between us but it seems like a generation).

Nigel was born at the end of the war, he is a child of that post-war austerity (like another friend Bernie Rhodes). The resilience of that generation is something I’d like to inherit.

Let’s celebrate getting older and learn to love the older life – however young we are!

Nigel and sheila 2.jpg

Posted in age wage, pensions | 3 Comments

#NESTinsight19 – worth it!

The world’s most pampered think tank?

Released from the bondage of the catheter, yesterday I made the short way from Tapper towers to the offices of JP Morgan for a day with NEST Insight.

NESTinsight is a think tank, this might conjure up a vision of a lonely platonist in hist tower but it’s not quite that spartan. NEST Insight’s conference was supported not just by JP Morgan but by Vanguard, Invesco and its research by LGIM. I was getting gratitude fatigue well before the end of Will Sandbrook’s opening address.

There is a serious point here, good as it is that NEST Insight is not making further inroads into NEST’s £1,200,000,000 taxpayer loan, we’ve got to remember that it is blowing the research budgets, not just of the financial services companies sponsoring, but of a lot of other research projects that do not have NEST’s glamour. Be careful what you spend guys.

This is highly hypocritical of me as I spent whatever time off I had wolfing down the posh nosh, making up for three days of hospital food (thanks JP).

Universal pension credits?

The “context” of the event was given us by Will Sandbrook but while he spoke news broke of a rather alarming statistic which rather put the valiant efforts of NEST to get us to save more in the shade.

The reality of life in Britain today is that only 6 out of 10 people so poor as to need a top up to their state pension – are claiming. There were noises off about the pride of the working class not wishing to pick up means tested benefits, that’s Orwellian bollocks. Four out of ten people don’t claim pension benefits because they don’t know they can or they don’t know how to.

If the Government really want to help alleviate poverty in older age, they need to concentrate on the here and now, not just the future. We may become sufficient in time – thanks to Sidecars and behavioural economics but there are desperately poor people in Britain right now who should be auto-enrolled into pension credits.

Perhaps a bit of NEST Insight’s budget could be spent working out why – in the 21st century- with RTI and universal credit – we cannot get the right money into the right hands at the right time

Universal pension credits – my arse!

Enough moaning!

The rest of the gig was good. I particularly enjoyed the lunchtime session with Madeline Quinlan (despite me calling her out for telling us we should be “making the self-employed save”.

The work NEST is doing with IPSE and the DWP to work out what is the solution to Matthew Taylor’s problem is going down the right paths. I wish it was going quicker but this is a big big project and the thorough research looks proper to me.

I’m hoping that this research will be in the public domain before too long. It is vital that we get the self-employed back interested in pensions (though not at the expense of them losing their entrepreneurial instincts!

Good to see women to the fore.

There were some good panel sessions and for the first time in my memory – a four member panel without a man in sight.


You’ll have to follow my tweets for details of this and other sessions.

A good day and – despite my moans – a worthy day

We need the kind of thinking that the programme gave us, we need to think about behaviour and triggers and how to change things in a big way with small nudges.

We need to challenge NEST Insight, which is prone to being too much in the industry’s pocket. We need to challenge the DWP for getting flabby – thinking NEST Insight is doing its job.

Most of all, we don’t need to be complacent. Those 10.5m savers, 7m of whom have got NEST accounts are looking for decent outcomes. It’s one thing to save, it’s another to be financially capable of managing a wage in retirement.

If people can’t even get as far as picking up their pension credits, we know we have a lot more to do- by way of defaults – than we are doing today.

Posted in pensions | 2 Comments

We don’t know how lucky we are!

Wonky tapper.jpg

I have just come out of hospital. I was admitted on Monday afternoon, had a three hour operation under general anaesthetic on Tuesday morning and left at Wednesday lunchtime.

Had I not had the services of the NHS, I could very well be dead –  many have died from haematomas that made it impossible for them to pass water. Many still will.

I live close to Guys and St Thomas’ , have the mobility and confidence to get myself to the right outpatients and the determination to be seen. I am very lucky indeed.

Our health service is no small thing

The last time I was in hospital was in 1982, I had a bruised kidney and urinary problems then (not connected).

In the intervening years I have always known that a free public utility was awaiting me , were anything to go wrong.

Of course things have gone wrong for many of my friends, many have been through the NHS emergency procedures and have been nursed back to health through NHS care. A few have died with dignity.

Our health service is no small thing, it is a treasure we have created for ourselves, something we share with those who are visitors to this country and a source of comfort to immigrants.

In my ward  in beds beside me was a young Pakistani and an elderly Indian gentleman. We were looked after by students and nurses who’s origins were from Nigeria, Ghana, Sierra Leone, Ireland and even the UK!

My consultant is of Sri Lankan extraction. Our great London teaching hospitals are an expression of our commonwealth, we share with the world.

The comfort of friendship

Much is made of social media as a destructive force, but little of its power to bring people together. On Wednesday morning, as I was preparing to leave, I was visited by a consultant knew of me only through the conversations I have had on twitter with doctors (AA and the Taper).

Thanks to all the people who picked up on my tweet about being ill. It made it a lot easier – took away worry and made me think about you and not me.

Thanks to my brothers Albert and Gregory, to my son Olly – who visited me. Thanks most to Stella my partner who is my rock.

We don’t know how lucky we are

The reason that life expectancy has increased in this country has been clear enough to me over the past three days. There is a system of care which starts with the NHS and extends through our family and friends to our wider social circles. We support each other.

We have all this because we are lucky enough to live in the first decades of the 21st century where technology brings us together.

My mother, who could not get up from Dorset, spoke to me as I came out of the operating theatre, she called on a hospital landline from her landline in Shaftesbury. I was able to tell her the good news that there was no tumour under the haematoma and that I most probably did not have cancer.

It may not have been the most conventional of modern day communications, but – thanks to some nurses who really did care – it happened when she was worrying most.

And that is the real point of this blog. There are people in our National Health Service who are dedicated to alleviating pain, giving comfort to the worried and getting patients back from the perils of physical and mental failure.

Alastair Santhouse, a psychiatrist physician, chose to visit a patient rather than have a coffee break, he is just one of the many people who I am thanking.

It is because of these great people, that we can do the things we do, in commerce, in the arts and in public life. Our whole society sits on a platform of confidence in our health built by the NHS and the people who work in it.

We don’t know how lucky we are.


Posted in age wage, NHS, Personality | Tagged , , | 12 Comments

Family offices and Social Impact.

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Sometimes you get the key insights from the most obscure sources. Here is the statement that concludes an article posted on Linked in by Tony “Property investment” Miller who runs a Mayfair property boutique called Huriya (and is a member of the Pension Play Pen).

This is how the article starts

Some of the world’s richest people may take their money away from private bankers and wealth managers unless they offer more impact investments and philanthropy deals, according to family offices and foundations.

This is how the article ends

Yet the issue is a complex one for relationship managers, whose salaries and bonuses are often linked to the size of a client’s portfolio and its return on investment. While impact investments in theory eventually pay a profit, they’re often risky and can have lower returns.

The idea that impact investments are risky and can have lower returns is a common theme throughout financial services. The idea of philanthropy being profitable has become unfashionable. I was thinking about this question with regards the endowment of Trinity College Cambridge.

What I suspect Family Offices and Wealth Managers fear most about impact investment is that it is philanthropic and that they cannot pivot to philanthropy after decades espousing “greed is good”.

Philanthropy gifts, investing loans. However philanthropy can be a gift with reservation, that the gift is for a social purpose. Whereas social impact investing comes with a single reservation – liquidity – the investor can always ask for the money back.

Liquidity is the third (unspoken) issue that the wealthy may have with impact investing, it involves losing total control of wealth, which I suspect is what is meant by “risky”.

If (as predicted by Mark Carney and others  in this article in the FT) liquidity comes under pressure in funds, I would be surprised if Family Offices became sources of “patient capital”

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Philanthropy – Wealth diminishment?

I suspect that social impact investment is attractive to high-end wealth managers as it keeps family money in-house rather than see it flies off to philanthropic institutions, which explains this “peer group” advice

“To the extent that your clients want to do philanthropy, you should be helping them.”

Impact investing (the article stops short of talking of ESG- see below), is also a means of hooking the next generation of investors

“If we don’t get it right, we won’t be able to engage our clients in future,”

There could of course be a third reason for wealth managers to do the right thing, namely “to do the right thing”, though this might be a little too radical to a group of people who think that doing the right thing includes owning private planes, private yachts and expensive automobiles (just for starters).

Nothing philanthropic about wealth management

Wealth managers have seen the threat of philanthropy emerge with a new generation. They have recognised that social impact investment keeps wealth under their management and they are looking to minimise disruption by perpetuating the myth that investing for good is “often risky and can have lower returns”.

I find the high-end of wealth management enlightening as it is transparent.  Huriya is the arabic word for freedom, specifically

Screenshot 2019-07-01 at 06.08.19

this kind of freedom is flatly opposed to external governance and gives licence to any kind or environmental or social misbehaviour.

One can only wonder how Sustainable and Responsible Investment fits into a “Huriya” framework.


For completeness , here is the whole of the article

Some of the world’s richest people may take their money away from private bankers and wealth managers unless they offer more impact investments and philanthropy deals, according to family offices and foundations.

RS Group Chair Annie Chen, whose Hong Kong-based family office is dedicated to impact investments, said at the Asian Venture Philanthropy Network conference in Singapore Wednesday that despite many banks promising to offer more deals that do good, front-line bankers and relationship managers often failed to do so.

Her comments come as private bankers prepare for the transition of wealth away from older family members and toward next-generation investors who have expressed a desire to change the world for the better as well as make money. More than one-third of wealth clients surveyed by Ernst & Young LLP in a report last month said they’re planning to switch financial service providers within the next three years because they’re dissatisfied.

“I’d urge you to really step up your game besides the pronouncements that you make at the likes of the World Economic Forum, and give a budget to your different branches, different regions so that your front-line people — the wealth relationship managers — actually get educated about sustainable investing,” Chen said.

William + Flora Hewlett Foundation President Larry Kramer echoed her sentiments. The $9.9 billion foundations was established by the co-founder of Hewlett Packard Corp. and it awarded about $408 million of grants in 2017.

“A big part of our climate work is beginning to focus on getting banks — retail and investment banks — to change exactly that,” he said on the sidelines of the conference. “To the extent that your clients want to do philanthropy, you should be helping them.”

Read more: Harvard Course Helps Rich Millennials Do Good (and Make Money)

Standard Chartered Plc’s global head of private banking and wealth management Didier von Daeniken said the inability of front-line staff to offer better information was “the biggest headache for us.” High-net-worth individuals will have almost $70 trillion in net investable assets by 2021, according to E&Y.

“If we don’t get it right, we won’t be able to engage our clients in future,” he said.

Von Daeniken said Standard Chartered is training about 50 bankers, or around 15% of the private banking and wealth management team’s front-line sales force, to be experts in the field of impact investing. The bank’s assets under management in impact investing are still small, but growing at more than 10% a year, he said.

Yet the issue is a complex one for relationship managers, whose salaries and bonuses are often linked to the size of a client’s portfolio and its return on investment. While impact investments in theory eventually pay a profit, they’re often risky and can have lower returns.

Posted in advice gap, age wage, ESG, pensions | Tagged , , , | 1 Comment

Why do we need funds?

James Coney, formerly of the Daily Mail and now of the Times is a campaigning journalist who says it as he sees it- and that’s refreshingly transparent

He is asking in an article the question that’s in the title of this blog. His starting point is this statement.

Open-ended investments, more commonly known as funds, are in the middle of an existential crisis. Right now, low-cost trackers and investment trusts look like much better products because funds seem fundamentally flawed in their design

James ends his recent piece in the Times

The IA (Investment Association) is boldly plotting a way towards better transparency, but I don’t really think its members are on board.

It must start from the principle that investors are entitled to have full details of what assets are being held — not what extra information they should be allowed to have.

It is, after all, our money — not theirs.

James is kicking off from the problems investors are experiencing with the Woodford Equity Income fund.

But he seems to be questioning what it is that we’re getting from funds that justifies the assumption we should use them.

Funds – the great feeder

I had this conversation with a couple of gents from an insurance company who were asking me what bits of financial services we could do without.

I said “funds” and they blanched.

Funds are indispensable to the financial services industry but not – it would seem – to its customers. Funds are a source of income for fund managers, asset managers, custodians, lawyers, accountants, brokers, ACDs, traders and platforms. I think I could write a lengthy blog just on the retinue of flunkies who feed on funds

When you think what a fund is – (a collection of investments offering people easy ways to get your money in and out of investments) – it really shouldn’t be so hard.

Take funds out of the equation and a whole bunch of people would need to find new ways to get fed.

Is there an alternative?

It is extremely hard for investors to avoid funds but there are ways. People can invest directly into the stock market, or they can buy shares that passively replicate the stock market (ETFs) or offer investment through a shareholder trust (investment trusts). These alternatives are frowned upon by fund managers and it is easy to understand why,

I am not convinced by the transparency of investment trusts and ETFs any more than I am by most funds. But they do at least present a challenge to the fund management industry.

What I hope for is wholesale reform of the funds industry that will allow us to properly understand what we are investing in. This should not be as hard as all that, but as we have seen with Woodford, a list of holdings can be bait for hedge fund managers to prey upon funds that are in the process of changing these investments.

People like Dr Chris Sier, who has pressed for better standards of reporting, are now actually enforcing better reporting. But ordinary people are still a way away from properly understanding what happens with their money.

The alternative to not knowing – is knowing. People have a right to know where there money is invested and if we had the courage to tell them, those people who manage funds might get a pleasant surprise.

The alternative

We shouldn’t do away with funds, but we need to start thinking of funds as things that help investors rather than things that pay the people who run them.

As James Coney points out

Investment firms dish out information like gruel in a poorhouse and we’re made to feel grateful for what little we get. Don’t dare ask for more.

The point is this, telling people what is going on is not bad news for fund managers, unless they have something to hide. The good fund managers do not hide and already Chris Sier’s ClearGlass organisation is listing managers who do a good job.

Many Independent Governance Committees report that they are still having trouble getting the information they need to discover if funds are giving value for money.

Organisations like AgeWage are able to show people the value they get for their money, bypassing all the complex reporting and just comparing money in and money out.

Both ClearGlass and AgeWage have been criticised by making the complex simple. But the truth is always simple.

The alternative is simplicity and it comes through transparency.

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Farewell to the Pension Play Pen lunch


After nearly 12 years of monthly lunches, I have decided to discontinue the Pension Play Pension Lunch. There will be no lunch on Monday July 1st so please do not go to the Counting House.

12 years is a long time. It was Robert Gardner who suggested we had a monthly dining club and the first lunches were held upstairs in the Dining Room of the City University Club.

We switched to the Counting House later that in 2007 and they have been terrific hosts ever since. I’d like to thank the various managers and army of waiting staff who’ve looked after us over the years.

Recently we’ve seen a fall in numbers and though the discussions have been no less vigorous, I must admit to my becoming a little jaded.

So I’ve decided to knock the lunches on the head for the summer and consider whether we may launch new AgeWage lunches in the autumn! I’d like a new venue, perhaps the WeWork I work in in Moorgate. Any ideas to

My biggest thanks are to you, the loyal Pension PlayPen lunchers who’ve been such a pleasure to each other and to me.

We will meet again!


Posted in pensions | 1 Comment

The trouble with conformity – USS latest



The dissenting voice has long been upheld in British Universities. Minority opinions are valued as an antidote to received wisdom which all too often degenerates into herd-like conformity. So I worry when I read the justification that the USS are giving for their current stance on risk.

“The trustee’s fundamental belief is that risk is multifaceted, and requires a wide perspective, and broad tools to manage it appropriately. This approach to the valuation has been carefully constructed, and robustly built based on independent advice from our scheme actuary and covenant adviser. It has been subject to independent review by a third party actuarial firm, and by TPR. None of these reviews has suggested there is scope to take the level of risk in the funding arrangements that is proposed by recent commentary”.

The “recent commentary” in question is from Dr Sam Marsh and it criticises the Trustees’ position for being overly focussed on today and insufficiently focussed on the longer term. Marsh’s position is characterised like this

In effect, Dr Marsh’s approach takes the JEP’s proposals to ‘smooth’ contributions over two valuation cycles, and extends that to 20 years. It is not surprising that when this is done, current contribution levels are (in aggregate) ultimately adequate.

Taking a long-term view on funding as a basis for today’s snapshot valuation may not be “multi-faceted”, but it has one serious ally to commend it, common sense.

The USS has to take a long-term view as it is designed to run for hundreds of years through all kinds of economic conditions. The current conditions give us the lowest gilt yields on record and in any common-sensical view of history, would be seen as anomalous.

Projecting current conditions inexorably into the future is taking “short-termism” to an extreme.

Sam Marsh and Jane Hutton

Sam Marsh is not a trustee of USS, Jane Hutton is – albeit a suspended trustee, (charged with a kind of treason). Her treason, to point out that the consequences of following the strategy proposed by the USS risk management team would be to push contributions up making the scheme unviable for some employers and leading to new calls to close the scheme to future accrual.

Since the information that Jane Hutton- one of Britain’s leading statisticians, has been denied her, she is unable to carry out her job as a trustees (as nominated by the members). Sam Marsh has picked up where Jane Hutton cannot follow

The two of them are not wreckers, they are simply trying to make it clear to the members of USS that there is an alternative to the USS view of the world (multi-facteted as it is) and that view is based on common sense.

Common sense says that people will continue to want to go to Universities and British Universities in particular.

Common sense says that University teachers want to be paid a wage in retirement from a defined benefit scheme rather than something else.

Common sense tells us that the current dispute is being won by the likes of Marsh and Hutton and from the member’s union who say there is scope for the USS to take a long term view, invest for growth and adopt a discount rate that reflects the strength of the British University system (as confirmed by various covenant assessments).

So I am very much on the side of Jane Hutton and Sam Marsh and not on the side of actuarial (and regulatory) conformity.

Trouble brewing

While the USS stonewalls, there is increasing questioning coming from other third parties – specifically from Frank Field who is questioning not just what is going on with Jane Hutton, but why the Pensions Regulator appears to have been dilatory in its dealings

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The letter is part of a wider inquiry from the Work and Pensions Select Committee into just what the Pensions Regulator is up to.

The trouble with conformity

The trouble with conformity is that – unless challenged – it produces received wisdom which may not be wisdom at all. Received wisdom is that privately funded pensions should not provide guarantees and so USS should close to new members and cease future accrual for existing members.

The Pensions Regulator, charged with keeping DB schemes out of the PPF seems to be complicit in the USS’ current strategy – which will likely lead to closure of the scheme.

The USS has recently been rebuked by TPR for overstating the explicit support of tPR for its strategy and of putting words in the regulator’s mouth. Nonetheless, the question Field asks, suggests that the relationship between tPR and USS is at best “cosy”.

The trouble with conformity is that it breeds arrogance, arrogance that with their actuaries and their regulator on their side, USS is invulnerable and can do as it likes.

But the behaviour of Jane Hutton and the work of Sam Marsh are showing how very vulnerable USS can look – and with them, those parties who presume that the USS are too big – too advised and too well paid – to be wrong.

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

Darren Cooke – outstanding contribution

For those not at the Money Market Awards, here is the speech I gave in praise of Darren Cooke who rightly won recognition for his work and his spirit. Thanks Darren


Outstanding contribution to the profession

This year’s award will not be controversial. Nobody would deny our winner this accolade – he is universally regarded with respect and affection by his peers and his clients

Our winner worked at HSBC for 18 years – leaving when his division announced a plan to go restricted. He started with network Positive Solutions but went directly authorised in 2016.

He says the suggestion by networks, that small firms cannot afford to remain independent amounts to scaremongering.

With typical directness he has been on the record saying

‘Most networks are run by life insurance businesses that are trying to create a route to market for their products. It is cheaper to remain independent”

He calls his firm Red Circle  ‘His  idea’s “your finances are important, so red circle them”… the circle also represents the concept of holistic planning and provides a memorable image for the branding

Our winner uses the Institute of Financial Planning’s six-step process as the framework for his advice.

his  chartered financial planning qualification proves his technical ability , but for him being  certified is about applying that ability with soft skills and the ability to understand the client.

Today he is most famous as the architect of the cold-calling ban which finally came into force on January 9th .

It means that for all but FCA regulated advisers, no one can cold-call on pensions in this country without risking a fine of up to £500,000.

The ban has been implemented on all live, unsolicited direct marketing calls relating to pensions.

The ban is already protecting those vulnerable people whose pensions are at risk from fraud.

It will protect many more whose savings are growing under auto-enrolment.

Our winner is making a material difference in the battle to restore confidence in pensions.

Britain owes our winner a debt of thanks.

But it’s also his personal qualities and business skills for which we acknowledge him tonight

Here’s Victor Sacks

He is a wonderful guy. An attentive listener who has all the qualifications, but ensures his clients are not blinded by them. A straight talking no nonsense man, I’m delighted to call a friend.

And here’s his client Angela Richardson

he made the whole exercise understandable, financially advantageous and organised.all I had to do was sign on the dotted line. I would highly recommend him to anyone seeking financial advice.

I am sure that there is no-one in this room who does not know who I am talking about.

Ladies and Gentleman, the winner of this year’s award for outstanding contribution to the profession is Darren Cooke.


And thanks to the Editor and Compere!

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One life – one retirement – two regulators

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Quietroom and DG’s Pension Map

Yesterday’s Pension and Benefits UK conference kicked off with consecutive speech’s from TPR CEO Charles Counsell and the FCA’s Edwyn Schooling Latter.

Counsell delivered a staid and unambitious rehearsal of tPR’s agenda and frankly I was bored. Schooling Latter spoke to an agenda that most in the room seemed unfamiliar with. He left without taking questions and the FCA were nowhere to be seen at the Exhibition. We need more of Schooling Latter, he was good.

Making sense of the pensions regulator

I am trying to create a ratiocination between the regulator’s approaches. It is hard to do so, the FCA is approach pensions from the point of view of the consumer while tPR looks at life through the lens of sponsor and trustee.

Referring to Quietroom’s map of the pension world, the Pensions Regulator is increasingly about how we build up money while the FCA is responsible for outcomes.

Outcomes are managed on the right of the diagram while the savings phase is to the left. While the FCA has skin in the game in saving (GPPs and Stakeholder plans) it is primarily concerned with what happens after workplace pensions give out.  While the Pensions Regulator oversees scheme pensions (and we hope CDC) , it is primarily about workplace pensions and auto-enrolment.

Actually the role of trustee and employer is becoming less important over time as pensions either level up or dumb down to a consistent contribution schedule and DB schemes are put to bed through the uniform funding code proposed by tPR. The scope for innovation in the accumulation phase is limited and tPR and its world of occupational trustees is little more than a compliance function of the DWP.

This explains why I found Counsell’s speech boring.

Making sense of the FCA

While tPR baton down the hatches, the FCA innovate. The FCA has an innovation unit, a sandbox and a pensions policy team that is looking to do new things better.

Later in the day, I biked down to Stratford through Victoria and the Olympic parks, you know you are nearing the FCA as you pass West Ham United’s Olympic stadium and the white swan pedillos that meander beneath the FCA’s offices. You can approach the FCA through the Westfield shopping centre but try a Boris Bike instead – the FCA has its own Boris Bike stand.

The three big deals on pensions for the FCA are

  1. Stopping the flow of DB transfers
  2. Sorting out the choice architecture at retirement
  3. Ensuring we get value for money.

I met with Pritheeva Rasaratnam and Cosmo Gibson (of the value for money team). Pritheeva is head of pensions and funds policy and our discussion focussed on the needs of ordinary people to get to grips with their pension pots and do the best they could by them.

We used Quietroom’s map to understand where we were coming from and how the consumer related to the various stages of their retirement savings journey. It was – to coin a phrase – clear vivid and real.

One life – one retirement – one pensions map.

Not for the first time, I thought yesterday having two regulators very unhelpful.

For all the rhetoric about working “ever more closely”, the two regulators see things so differently , behave so differently and are so physically dislocated that they might as well be on either sides of the moon.

What is worse, the pensions world is similarly bifurcated. I tried to follow reaction to Schooling Latter’s excellent speech on twitter

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The occupational pensions crowd aren’t that interested in the FCA,  I suspect they aren’t that interested in pension outcomes either.

But the members of the occupational pensions schemes are very interested in their outcomes. They are much more interested about what they can get out of their pensions than all the issues surrounding scheme administration, member communication and financial education.

  1. They want to know where there money is invested
  2. They want to know they are getting value for their money
  3. They want their money paid back to them fast and easily.

The Pensions Regulator seems to have lost sight of these fundamentals in its earnest pursuit of compliance to its various employer and trustee codes.

It is only by putting the people who own the money – the people who get paid the money- as the focus of the map, that a one-world map of pensions makes sense.

Exactly the same can be said of pensions regulation and – judging by what I saw yesterday, it is TPR and not the FCA – who have most to do.





Posted in advice gap, annuity, pensions | Tagged , , , | 1 Comment

Lady Godiva , Neil Woodford and Peeping Tom


I have taken to reading some of the commentary about what’s going on with this chap Neil Woodford because it’s generally guff and makes me laugh.

This blog makes me laugh (and cry) out loud. It’s entitled “Benefits of Segregated Mandates”

I print it in its entirety

The past few weeks have brought into sharp focus some of the benefits of managing money using segregated mandates for those that have the necessary scale. Alongside this is a need for oversight of governance not just the investment approach. And, research agencies need to do more to assess governance and liquidity.

Over drinks with an industry mate the other night, he referred to the benefits of segs as the 3 Ps: prescription, price and portability. SJP and Openwork client money isn’t locked in Woodford’s fund. Both firms swapped the manager and both restricted holdings in unlisted securities.

While segs come out looking good over the past couple of weeks they only work with the right governance and oversight. This requires scale, the right culture and the right people.

I hear from a lot of largish financial advice firms that they plan to introduce segregated mandates. There can be enormous benefits but it’s not a decision to be taken lightly. There are a lot of mouths to feed – the ACD, custodian, fund admin, depository, etc.

Scale is needed not just to negotiate on price but also to put in place the necessary oversight. Scale alone isn’t enough. There needs to be a culture that allows people to question decisions and the right people in place to ask the tough questions. Firms managing money using segs need people around the table with legal, investment and regulatory experience to provide the necessary oversight.

What about the customer

The people around that table need to have a keen focus on the reason they are all there. They have a regulatory responsibility to the customer. They also have a moral obligation. We think that too often the customer is forgotten.

Failure of research and ratings agencies?

As for firms not using segs, we need to push research and ratings agencies to evaluate and highlight the governance of funds not just investment approach and performance.

A lot of advisers hold Woodford in models they manage for clients. They will be looking to rebalance those models at the end of the quarter. A few weeks ago it would have looked sensible to hold Woodford. Heck, it had a Morningstar bronze rating in May! Who knew how illiquid an equity fund could be?!

This is exactly why the research and ratings agencies need to shine a light on governance. Advisers rely on third party research to short-list funds. Stress testing portfolios for liquidity seems like a good idea. Ratings can’t be just about investment performance.

I don’t know which of the people at Next Wealth wrote this. I know Clive Waller and Heather Hopkins and deserve like Peeping Tom – to be struck blind.

It needs to be said, this piece is guff of the first order.


I am laughing at the thought that St James Place and Openwork can be seen to be coming out of the last few weeks “looking good”,

The only perspective which allows us to see SJP as looking good, is one that benchmarks SJP’s next few weeks with those of Hargreaves Lansdown and other platforms awaiting the write downs to come and the dismal drop in price of Woodford Equity Fund units when they return to the market.

It may be that SJP’s customers are not so badly off as those directly investing in Woodford but that does not make SJP look good. SJP fund with “Woodford Inside” actually underperformed just about every other comparable fund, and underperformed Woodford’s Equity Fund too.

SJP may argue that because they didn’t include the Guernsey illiquids in their segregated mandate, they haven’t benefited from fictitious valuations on non-tradeable stocks (as WEI has).

It may be that when the gate is opened , SJP customers will win a prize for tallest dwarf but that is not in itself a cause for celebration. The customers have still had a bad time because Woodford was inside their funds and they have paid Woodford handsomely  for delivering nothing at all.

In terms of “value for money”, SJP’s employment of Woodford looks a total wash-out. SJP are not of course on the hook for Woodford, they may have got Woodford on the cheap (you get your own price in a segregated mandate), but the customers paid the going rate for SJP funds and all the price negotiation mentioned above benefited the SJP shareholders rather more than its policyholders.

The firms who offer “seg” mandate “need” plenty of lawyers, ACDs, fund admins, custodians and depositaries, or so the article tells us. But do the customers benefit from this army of flunkies who push up the total cost of management? It is almost impossible to work out from looking at SJP funds why they perform so badly , but the suspicion is that the yield drag from the “mouths to feed” is a major part of it.

In short, SJP’s fund governance failings over Woodford are every bit as heinous as everybody else’s and for the fund industry to pretend that “seg” mandates have ended up protecting customers is preposterous.

Segregated mandates are a vanity play of the first order

There is nothing new in segregated mandates. Defined Benefit schemes have been dishing them out to fund managers (under the advice of consultants) for donkey years.

They give trustees the illusion of better governance but in reality they provide jobs for the boys and very little added value for the people picking up the tab – the customers.

Of course the funds industry loves “seg”, it gives everyone something to do and allows fund marketing people to peddle the twaddle above.

Would the world be a lesser place for the loss of segregated funds – no!

Does the world need a fund universe full of actively managed pooled funds – no!

The entire funds industry exists for the benefit of those who serve it and not for the customer at all.

Most of the properly managed DB schemes find better ways to get exposure to markets than by dishing out segregated mandates, the biggest manage assets directly, the smartest go for cheap well governed Beta through passive pooled funds.

Wiping all these silly – self obsessed – institutional segregated mandates would be a step in the right direction

Wiping all these silly – self obsessed – wealth management DFMs would be another step in the right direction.

Retail or institutional , they could all be absorbed into LGIM, BlackRock and Vanguard’s maw and exchange their pokey cottage industry governance with some proper stuff that really managed the money for good.

I have said enough

I am going to be a judge on one of these industry award things run by Clive Waller. I expect he’ll be asking why I was ever allowed to darken the judging panel’s door.

The answer is of course that in the court of Godiva, I am the peeping Tom.


May I be struck blind.

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New research shows BSPS transfers driven by fear not greed.

tpr 4


I have on my google drive a piece of research conducted by one of my friends – a steelworker himself – who was one of the main pillars of support for steelworkers faced with the hard choice of whether to have benefits paid as a CETV, from the PPF or from a new version of the British Steel Pension Scheme.

You can now read more about this on Maria Espadinha’s excellent article – many steelworkers spent less than 2 hours with an adviser.

It’s not my research to share so I won’t be overly specific. The research has garnered a response from 176 steel men who transferred over the BSPS “Time to Choose” campaign.

What is different about this work is that it is not focussed on Port Talbot but represents the dispersal of deferred BSPS members accross the country. So there are large numbers of respondents from Teeside, many from the Welsh borders and quite a few from South Yorkshire. The rest are scattered around the country and indeed the globe. So the research is representative of decisions taken across the deferred membership of BSPS.

I very much hope that the researcher will share the research with the FCA and with the wider public.

The second point to make is that the vast majority of people responding did transfer and that most of them are happy to have done so. There are a fair few who are unhappy and fewer who “may be” happy.

The research asked about  the amount of time spent with an adviser over the decision. Again there is a wide dispersal of answers with a seemingly even split between spending less than two hours  and those spending two to four hours, a handful spent more than four hours. The results do not suggest that advisory were piling it high and selling it expensive.

Similarly the research does not show a wholesale use of “vertically integrated” solutions. We can see from the data gathered – where the money ended up – and the vast majority ended up with insurers and not in SIPPs.

Fear not greed

Finally we can see why people transferred and the vast majority of answers remain because people had “no confidence in the British pension scheme“.

This final point is the one that should be most worrying to the Pensions Regulator. Although most of the flack for what happened at Port Talbot has been directed at the FCA, the root cause of the problem was not advisers, or even the pension freedoms. For the majority of the people in this survey, the problem was the ability of the British Steel Pension Scheme to pay its pensions.

Why was confidence in the scheme so low?

It is hard to avoid the conclusion that something went badly wrong in the promotion of BSPS2 (New BSPS) to the deferred membership.

That 8,000 deferred members transferred away from a solvent scheme well over £3bn , suggests that the benefit of staying in the pension scheme were undersold. If the Pensions Regulator thinks that the decisions taken by members on transfer are outside its scope, they should think again.

One of the pillars that TPR is built on is “protecting member interests”. Quite clearly, a high proportion of the members of BSPS felt no confidence in the scheme they were in and continue to feel that way , two years later.

TPR can point to a lack of confidence in the sponsor – TATA- but that is to surrender the point of the Regulatory Apportionment Agreement, which was designed to protect members if New BSPS succeeded or if it failed. The PPF benefits bought by taking no choice or if New BSPS collapses, are still much better than the annuities that can be purchased from CETVs.

It is only if steel workers genuinely wanted to manage their pension rights from a drawdown policy, that CETV made any sense at all. And yet, many of the deferred members voted against the strong steer from the Trustees and the Regulator to stay put.

Why was confidence in the scheme so low? The answer is blindingly obvious, no-one was listening to the deferred members (except financial advisors).

Advisors to blame?

Clearly what went on in South Wales was a disaster and the research shows a higher number of people unhappy with the transfer decision they took – living in South Wales, than  satisfaction levels elsewhere.

But the research does not show as high a level of dissatisfaction with the advice offered as I would have expected.

People have a right to a CETV if in a funded pension scheme and people have a right to shape their retirement income as they choose. We should not forget that many of the people who transferred remain happy with the choice they took.

Nevertheless, the problems with advice may be for the future, the research shows that only a handful of steel workers transferred having paid a fixed fee, the vast majority did not have to find the cash for the advice, it was found for them from the transfer value. There is a chance that in five years time, were this survey to be repeated, the damage done by high adviser charges would materially change satisfaction levels in advice. However, the evidence that I have before me does not suggest the majority of those advised feel they got a bad deal

That said….

The question TPR should be asking, is whether it should allow itself to feel exonerated by the failings in advice in a minority of cases and I think the answer is “no“.

Managing public sentiment isn’t easy but…

For me the Pensions Regulator has still a lesson to be leaned from BSPS. It is evident in the research I am looking at.

People can be easily spooked to transfer away from occupational schemes and be frightened by the idea of the PPF. It is easy to do this because of high transfer values boosted by the de-risking that the Pensions Regulator’s current funding regime is encouraging.

The consequences of low levels of perceived support for occupational DB schemes is a continued flight to advisers who are happy to offer easy to pay for advice to take CETVs in a painless way.

Isn’t it time that tPR and the FCA did something not just to change the behaviours of advisers, but to encourage people to want to stay?

By which I mean some positive intervention by tPR to promote the benefits of a scheme pension.

Sadly, I see this as low down the list of tPR’s priorities, much much lower that its obsession with self -sufficiency and recent variants thereof.

So long as we have high transfer values, low barriers to transfer and low confidence in defined benefits, we will have high ongoing levels of transfers.

It is within the FCA’s gift to put an end to contingent charging, but it is in the Pension Regulator’s gift to allow schemes to remain invested in growth assets so maintaining reasonable discount rates and avoiding high transfer values.

tpr 4



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

The advisers who went away

port talbot steel workers

Laura makes a good point and it’s one that goes to the heart of the retail distribution review.

Money paid to financial advisers should be for advice. Where an adviser charges ongoing fees for advice, there must be ongoing advice.

Currently, the mechanism for paying for advice is for the client to request that the advisory fee is no longer paid, but this is a mechanism that relies on the client being aware of the process and self confident enough to turn the fees off.

Why we need lawyers to get involved is that, as with PPI, most people don’t understand the process and even when they can see what to do, are nervous about doing it.

To put it bluntly, ordinary people are out of their depth.

Hitting the nail on the head.

I don’t know Laura Robinson or her firm – Thrings , but she clearly understands things from her client’s point of view and is refreshingly blunt in her views.

The only reason most of the Port Talbot steel men met with an adviser was to get the IFA to take on the responsibilities of the Trustees.

I refer back to this poll done by steel workers by steel workers in September 2017. “Take their pot and let their IFA manage it”

poll bsps anon

Most steel men I spoke to at the time thought of IFAs as some kind of independent trustees – they knew only the trustee model as all the wealth they had ever had was managed in BSPS by trustees.

There is an important point to be made here. BSPS Trustees were a free service that steel-workers took for granted. They simply weren’t prepared for the fees of wealth-management because many of them had no experience of paying professional fees.

It is sad that their only experience of paying fees may be  to advisers who have gone away.

Advisers – good and bad.

The wealth management model is good for people who understand wealth. These are people who have solicitors, accountants or at least know how professional fees work.

The wealth management model is absolutely wrong for people who don’t understand professional fees , don’t know how professional practices work and who are daunted by challenging their advisers when they realise they aren’t getting value for money.

Despite this , many financial advisers continue to extract large fees from these vulnerable people and they can do so through a frictionless process known as “contingent charging”.

Contingent charging works just like PPI but on a massively larger scale. It is a buy now – pay later scheme where the cost of the service isn’t felt by the customer till the money in the pension pot starts running out.

Contingent charging preys on the lack of knowledge, experience and confidence among blue-collar workers and others who may have money but have no experience of “wealth”.

We cannot regulate to stop financial advisers taking advantage of contingent charging (or indeed ongoing adviser charging). We can legislate to stop contingent charging and we should do – the FCA could write this into their secondary legislation now – though I fear it is way too late.

As for advisor charging, I think the onus is on the advisor to justify the fee , not for the client to estimate if they are getting value for money. I do not think that the majority of adviser fees are easy to turn off.  Turning off fees depends on the capacity of clients to understand what they have bought and as Laura’s tweets demonstrate – most of her clients just don’t have the competence , expertise and confidence to contradict the advice of advisers – which is to pay for advice.

IFAs are asking to be treated as professionals

Most IFAs I know are every bit as professional as lawyers and accountants. Indeed many lawyers, as Laura points out, have swapped advice for ambulance chasing and turned themselves into the kind of transaction-based  pariahs that the worst IFAs are being accused of.

Some vulnerable clients may lose as much to dodgy legal practices as dodgy IFAs.

And this is where we have to take a step back and ask just what is going on. We have a system of occupational pension schemes where those who work for certain companies get rewarded with a wage for life.

This system is disrupted by IFAs who take money through contingent fees on the basis they will do what Trustees did – which – in the steelworkers mind – is manage the pension pot.

And then it all falls apart when the steelworkers find that their IFAs are nothing like the trustees, that their is no highly experienced CIO managing their money, no actuary ensuring there is enough in the pot, nobody – nobody at all – acting in their interest.

This is why the FCA are so concerned

The fundamental problem at the heart of the transfer problem is that almost half of the people who are transferring (FCA number) should not be exchanging the fiduciary promises of their occupational pension scheme for the open market.

I’ll leave the last word of this blog to Stefan, who is a former steelworker and someone who has done more than most to protect his colleagues from financial harm.

BSPS Missing

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FCA plan to get tough on poor transfer advice

cumbo cetv2

Two unexpected  things happened yesterday; SJP’s candidate for the “fireside chat” with the FCA – went sick (with no replacement offered) and the FCA published their market- wide data results for defined benefit transfers.

Together this meant my fireside chat with Debbie Gupta turned into a tete a tete and a very illuminating one at that. That was because Debbie Gupta is a straight talking person who answers the  questions put to her and says it like it is. She is constrained in what she can say (which is why we did not talk about Woodford, or ACDs or the failings of individual SIPPs , but she was prepared to talk about the data results and she did promise that they would prompt action by the FCA.

There are many, including me, who reckon that you don’t have to wait two years to decide whether there is evidence enough to consider DB transfers a problem.

The FT solicited a comment from Frank Field who’d read the data results

“Today the FCA tells itself, again, that only about half of DB pension transfer advice meets its own standards” “The alarm is ringing, people are still losing their life savings: It’s time to wake up. More of the same kind of regulation just won’t cut it.”

During our fireside chat I asked Debbie whether she thought that market forces would turn the transfer tap off. Interestingly the FCA do not accept that the rate of transfers has fallen recently (as evidenced by the results of leading life companies who have benefited from the flows). You don’t have to probe hard to find why, most IFAs are now a lot more cautious about taking on CETV inquiries and many are on quotas from their PI insurers which give them limited scope to do more than a basic triage service.

Since the FCA are not accepting that the transfer market is dynamic and changing, I went on to ask what kind of intervention would follow. I asked Debbie straight whether the FCA would ban contingent charging. She would not be drawn.

Back at the ranch, Megan Butler, executive director of supervision, wholesale and specialists at the FCA , was telling the FT the same thing

“We have said repeatedly that, when advising on DB transfers, advisers should start from the position that a transfer is not suitable,”  “It is deeply concerning and disappointing to see that transfers are still being recommended at the levels we have seen.”

£83bn and counting

The £82.8bn that has transferred via advisers from DB to DC is from data submitted by IFAs – 99% of IFAs submitted data and the number relates to transfers completed since April 2015. There may be some pipeline, some non-advised transfers (where the CETV was less than £30k) and there may be some under-reporting. This may explain the gap between what advisers report to the FCA and the higher figures of what is reported to the Office of National Statistics.

Frankly, what matters is that the FCA reckon half of these transfers shouldn’t have happened (against an expected “poor advice” rate of 10%.But because the data published yesterday does not include a longitudinal breakdown (which I suspect would show a slowdown in transfers), it is hard to understand Megan’s comment in bold (above).

And because we don’t know whether the 50% (bad) number applies equally to 2018/19 transfers to 2017/18 transfers, the FCA will have to do more counting.

Reviewing decisions


Meanwhile, the problems for those who transferred out back in 2015 are beginning to see a track record on their investments. The gains made when the markets were hot, are being eroded now the market is not (hot). If adviser fees , active management fees and platform fees are dragging back performance on pots already diminished by the contingent charge, the returns on the CETV itself may be looking pretty dismal.

By April of next year we will start to see five year track records on post freedom transfers and I’d like to see internal rates of return based on the CETV, not the amount post the contingent charge.

Since October of last year, IFA clients have been presented with a bar chart with two bars. The lower bar is the cash equivalent transfer value (CETV) on offer. The higher bar is  a capital sum – the amount which, invested in a risk free way up to retirement, would generate a pot large enough to buy an annuity which matches the DB pension foregone. The idea is that this  enables a client to see graphically how much of the ‘value’ of their pension they are giving up.

If this method were to be used by the FCA to sample the progress of invested pots since transfer against the defined benefit foregone, I think some of the numbers would be looking pretty scary (especially if compared with the pre- contingent charge CETV calculation.

While I appreciate that the performance tracks are short and that many people transferred for reasons other than investment, the bottom line is that the outcomes of these transfers are likely to be less security, lower pensions and increasing anxiety for a high proportion of the 162,000 people who have transferred since 2015 will be experiencing low returns, lower pension expectations and heightened anxiety.

Taking action

We are continuing to see the FCA sporadically getting tough on bad advisers

But as yet we have seen no coherent move to identify, name and shame advisers who have consistently over-advised for transfer.

I sense from talking with Debbie , that this is only a matter of time.

The current sporadic action on those who have over-advised is not much of a deterrent to those still over-advising.  If the FCA want to cut off the oxygen to the CETV transfer market they must ban contingent charging which is a clear conflict of interest and consider further interventions with regards the destination of CETV monies.

One further question I asked Debbie Gupta was whether she knew the percentage of the £83bn that went into the defaults of the workplace pensions that those transferring were saving into. These default funds are capped on charges, need no advisory charges and are designed for the needs of ordinary people.

Instead of using workplace pensions, the vast majority of CETV money has been invested into Self Invested (non-workplace) pensions where charges are higher and advice necessary.

I question whether the people in this poll taken from September 2017 and conducted on the BSPS members Facebook page, knew just what “letting their IFA manage” their pot actually meant.

poll bsps anon

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

How proactive do we want the FCA?

Screenshot 2019-06-19 at 06.15.53

We get the regulators we deserve. It’s no use us whingeing that we have a reactive regulator if we demand a free market without interventions. But when there is evidence of malfeasance, we demand our regulators are quick off the mark and decisive when they get involved.

This afternoon I will be chairing what Horizon’s Lifetime Savings and Investment are calling a “fireside chat” between two chums, Debbie and Ian, both of whom I know and (like)  well.

Since the third bullet point is deliberately open, I hope that both Debbie and Ian will extend the conversation beyond the issues of DB to DC transfers and touch upon some of the problems with Neil Woodford and his crumbling empire.

As far as I am aware, this session will not be under the Chatham House Rule , but even if it is, I expect both participants will be guarded, the FCA have announced they are launching an inquiry about what has happened with Woodford so Debbie may be able to say nothing at all. Ian may be similarly constrained but…

On the wider issue of proactivity, we are inevitably drawn, when talking of DB to DC transfers to the events at Port Talbot in 2017, the aftermath of which is rumbling on today. I have an ever-diluted story to tell of those days. Diluted because what is happening today is playing out between the regulators, the steel men, the lawyers and Al Rush.

What is important is a statement made on Moneybox last Saturday by a steel man who pointed out he will have to live with the consequence of his decision for ever. The consequences of getting it wrong do not dilute for the customer, they distill.

Knee-jerk or knee-deep?

The FCA found itself knee-deep in the brown-stuff over Port Talbot. I was in the Committee Room when Frank Field lambasted the under-prepared FCA and Megan Butler has since shown a resilience to see through justice for those who have been wronged which I find admirable.

But the question remains, could the FCA have acted faster and – if they had – would many steel men now be looking forward to a lifetime income rather than a lifetime worrying about their wealth management?

To a very great degree this comes down to whistleblowing from the general public and from advisers who are conscious of what is going on.

This is the poll that was published on the Time to Choose Facebook pages run by the steel men through 2017.  The poll was taken days before Al Rush and I went down to Port Talbot the first time. We shared this poll with the Trustees , with the Regulators and – via this blog – with the general public.  I have blocked out the name of the person who posted the poll though he is now a friend.

Just then, nobody took it very seriously.

poll bsps anon

Pension Freedoms have little to do with it.

In 2017, many were blaming the decisions that steel-workers were making on the siren call of pension freedom. I didn’t, that’s because none of the steel men I spoke to had the slightest clue what would happen to their money other than “an IFA would manage it”.

Steel men simply wanted the likes of Darren Reynolds to pay them their pension rather than Tata Steel (who they saw as having taken over the stewardship of their pensions from the Trustees).

There was no question in their minds that they weren’t going to get a better pension having it away from Tata.

This then is the question for Ian Price and SJP. Because SJP did take money out of Port Talbot and only stopped doing so when the full extent of the contagion had emerged.

I’ve no doubt that SJP behaved responsibly at the micro level, but at the macro level, do the big financial organisations like SJP, Aviva and L&G – all of whom had peripheral involvement at Port Talbot – need to step up and say stop? Or is there job to let the FCA do that for them?

The same question arises for the investment platforms that are involved, in whatever way, with Neil Woodford’s fund management.

I fear that many people – including providers and regulators, have hidden behind the excuse that pension freedoms changed everything. It was not the pension freedoms that caused the problems at Port Talbot, no-one talked about them; it was the breakdown in trust exploited by IFAs who have subsequently proved untrustworthy themselves.

A fireside “chat”.

Sometimes, writing a blog, helps me prepare for an event to come and this is one such occasion. I hope that some of the people attending the debate today (and even Debbie and Ian) may have the chance to read my thoughts.

I enter the chat with no clear answer to the question “How proactive do we want our regulator to be?”. I hope that after forty minutes which I hope to be a rigorous debate,  I will have a clearer position.

If I am able to report on what was said and by whom, I will. If not, I suggest that you get yourselves tickets for future Horizon events as they look very good to me!


Fireside chat

FDR – top fireside chatter

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

For the 2m pension excluded.

Reform the payment of pension tax relief to ensure that no low earners miss out

We call on Government to ensure no low earners miss out on the tax top up on their pension contributions. We estimate that this issue hurts the living standards of nearly 2 million pension savers. Government should act to ensure low earners in all types of pension schemes receive pension tax relief






At 10,000 signatures…

At 10,000 signatures, government will respond to this petition

At 100,000 signatures…

At 100,000 signatures, this petition will be considered for debate in Parliament


  • Created byAdrian Charles Boulding
  • Deadline14 December 2019All petitions run for 6 months



Adrian Boulding

Posted in pensions | 1 Comment

The Four Trillion pound lifeboat for (some) British Pensioners.

Screenshot 2019-06-18 at 06.16.24

I was in Westminster last night for drinks on the terrace watching politicians lining up to tell their in-jokes about the Conservative party leadership contest. The jokes weren’t very funny and even if they were, I couldn’t tell you them as the jokers wanted drinks to be under the Chatham House Rule.

The Four Trillion pound lifeboat for British Pensioners

By contrast, we were here to discuss a very serious issue, the changing role of property in later life financial plans. I’ve just read the Equity Release Council’s excellent study called “Beyond bricks and mortar” and I recommend that you do too.

Property accounts for 35p in every £1 of household wealth – rising to 61p for non pension assets. That makes bricks and mortar, the biggest source of finance for those aged 75 or over.

65% of property wealth is held by the over 55-s , a massive 11%  increase since 2008. A third of over 65 households have more than £250,000 of personal wealth in property.

Screenshot 2019-06-18 at 05.45.40

The chart shows that net UK property wealth passed £4 trillion for the first time in 2018 – that’s nearly £79,000 for every household. Mortgage debt is falling as loan to value on our property plummets . We are paying off our mortgages and directly investing in property like never before and this investment has exceeded new mortgage debt every year since the financial crisis in 2008.

Can property stave off a pension crisis for future generations?

It would seem that people’s attitudes to their property are also changing. On the one hand we are seeing our property as useful to us as we grow older

Screenshot 2019-06-18 at 05.45.02

But we’re also seeing something new

Screenshot 2019-06-18 at 05.45.20

Less than 10% of people feel borrowing against a property in later life would be a stigma to them. Only a third of us feel we won’t have need to access income from property and nearly half of us recognise releasing money from property to supplement pensions is becoming more common.

We can no longer ignore what middle England is telling us, our property is though of as part of our pension – and people expect to pay for their breakfast sausages with the bricks from their dwellings.

You can buy a sausage with a brick

For those included in the great home ownership bonanza,  supply of lifetime mortgages is starting to meet demand. This is paradoxically because of pensions. The surge in bulk-buy outs by insurers of UK Defined Benefit Schemes, coupled with the maturity of many deferred annuity savings plans, means that annuities are being purchased at a greater rate.

Insurance companies are having to take not just the longevity risk but also the investment risk and they are looking for return seeking assets – just like everybody else. They have no interest in tying themselves into long-term gilt yields that offer them a return less than inflation. They are very interested in lifetime mortgages against our residential housing stocks which last as long as the home owners.

These mortgages exactly match the shape of the liabilities – people’s income needs in later life. Not only do they mean people can get the top-up income they need to enjoy their retirement, they mean that insurers can prosper in a competitive buy-out market.

Sausages all round.

Am I painting too rosy a picture?

I don’t think I am. The people at the top of the Equity Release Tree aren’t the snake-oil salesmen of yesteryear. They’re the serious politicians who may not be in parliament , but are still pulling strings. People like Chris Pond who chairs the Council’s Standards Committee and David Burrows, Chairman of the Council itself. Add to these a hugely enthusiastic and energetic CEO  in Jim Boyd and you have a trade body I’d be proud to be a part of.

To ordinary people in this country , property is the first thing they think of when they consider financial security in later life

Screenshot 2019-06-18 at 06.19.03.png

So while the politicians laugh and joke about the mess they’re making of this country, these people are quietly getting on with the great work of solving the need for an AgeWage.

A message to the Minister for Financial Inclusion

But I am painting too rosy a picture for those who do not know housing security, for those whose weekly shop starts with a trip to the food bank, for those for whom 10 years of austerity has not led to rising housing wealth but ever greater poverty.

For these people there is no help from Equity Release and precious little help from Government as they struggle to save for a pension.

Yesterday also saw the launch of a very important petition.

We call on Government to ensure no low earners miss out on the tax top up on their pension contributions. We estimate that this issue hurts the living standards of nearly 2 million pension savers. Government should act to ensure low earners in all types of pension schemes receive pension tax relief

I would be interested to know how  many of the nearly  2m pension savers not getting the promised Government incentive to save, will have access to lifetime mortgages.

If we want to be financially inclusive, we’d better think about the 2m who don’t get the housing breaks, as well as those lucky ones who do.

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The good in gating.

icarus 3


The wonder of the gating of the Woodford Equity Income Fund is that it happened in peacetime. There is no financial storm, the crisis is as random of the fall of Icarus in Breughel’s famous painting.

There’s no doubt that Woodford is right to gate, it’s the only way to protect the remaining investors from the markets, hopefully the fund can find sufficient liquidity to salvage itself (and Woodford).

The alignment of interests between fund manager and unit holders is important. No doubt there are lawyers sharpening their knives but unit holders have a lot more to lose by fighting their manager than by co-operating.

Now, another star manager – Nick  Train , is warning that the risks of underperformance could happen to his fund – Lindsell Train.  I suspect speaking out now is as much a  ploy to encourage his investors to stay than to encourage investors – overly dependent on his fund’s outperformance – to turn down the dial. Nonetheless, it’s good to hear a fund manager in something other than “asset-grabbing” mode.

The link between manager and investor is important and it’s that link which got broken with Woodford. Terry Smith still holds his investors in the palm of his hand and Nick Train is obviously looking to emulate.

That link is severed by intermediation and this may be the longer-term message of the Woodford crisis. The big losers of this – in terms of loss of shareholder value are Hargreaves Lansdown and other funds which took responsibility for the promotion of Woodford. I suspect that there are many heads rolling – and not just there.

The problem of platforms is not just that they disintermediate the relationship between investor and owner but that they become both dating agencies and divorce lawyers. Effectively they are a kind of marriage guidance service in the meantime.

It’s a strange kind of service that introduces, manages and fires and it’s small wonder that Terry Smith has been very shy of getting too close to the platforms.

The good in gating

What is good for investors is not necessarily good for platforms. Although SJP did not directly offer Woodford Funds , they did offer Woodford as a manager and when the gat came down, Woodford left the building. Hargreaves similarly stopped recommending WEI only when it was gated.

By implication , HL and SHP and Openwork and even Kent CC are kicking off against the protection of remaining members. They can only see the negative PR in gating, not the good it does.

Which really begs the question – are these platforms really acting for the member or their shareholders- which is precisely where I’d be starting my inquiry if I was the FCA.

Risk should be taken- where there’s a risk budget.

Robin Powell and other evidence-based investors have for some time been pointing to the risks of active managers losing liquidity. A friend of mine said just this to Neil Woodford a couple of years back.

Will investors in future accept that active equity funds can be as vulnerable to redemptions as any other? I expect they will not, that they will see Woodford as a “one-off” and demonise the manager for his conviction. Meanwhile will other active managers cease investing for any purpose than to make money? Will we  see a flight to closet tracking?

The appointment of Columbia Threadneedle, a house that has long spoken out against star managers, may be a sign of things to come.

But if it is , and we see active management becoming another branch of risk management, then where will we be able to take risks?

The wake up call for investors is precisely articulated by Nick Train when warning against dependency on his returns. Risk needs to be embraced but only when there is a risk budget.

The illiquidity premium

Longer term investors should be prepared for occassional gating, indeed they should welcome it. It is what gives them the illiquidity premium.

If Woodford was promoting his funds as being relatively illiquid, then occassional gating should be part of the risk warnings- I am aware that the T’s and C’s of the fund mentioned this option.

But investors don’t read the T’s and C’s of funds they invest in and that’s the problem. It takes a Terry Smith or a Neil Train to tell them how it is and I hope that is what happens over the next few months.

Far from running scared of gating, fund managers should promote their capacity to gate – to protect short-term investors.  If gating frightens off short-term investors and speculators – that is a good thing; so long as everyone knows the rules of the game


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TPR’s impatience with USS’ fibs


A previous phoney deficit

Phoney deficits

The Pensions Regulator’s patience with USS and its Trustees is running short.

The FT has got hold of an email from TPR which rebukes USS for overstating its deficit and misrepresenting the views of TPR on discount rates. (you can read the FT article on this link – thanks FT)

The deficit has been presented at various levels- including the £10bn quoted above – part of the 2017 valuation pack. The scheme published a consultation document in January outlining how the plan had a (revised) deficit of £3.6bn , but even that is now showing much too high.

In its January consultation document, the USS set out its approach to valuing the scheme, including the liabilities, and said the regulator

“prefers measuring discount rates relative to gilts”.

But the regulator said in its email to Jeff Rowney, USS head of funding strategy, that this statement by the scheme was “incorrect” as the watchdog had no preferred approach to setting discount rates.

The impact of phoney deficits

The impact of USS’ actions – has been to set the Trustees on a path that requires it demand unsustainable contribution rates to the scheme to meet a notional deficit.

The implications of TPR’s intervention are that the deficit arising from USS’ valuation is too high, that the deficit contributions are unnecessary and that by overstating the deficit, USS and the Trustees are undermining confidence in USS.

We have seen just where this leads. Last year it led to a strike, this year it is leading to Trinity College walking away from the scheme apparently fearing it could be the last man standing.

Just why USS is intent on being the architect of its own demise is unclear. It’s firmest supporter is not the USS, but the University and College Union who have this to say

“This latest revelation will do nothing to calm the frustration felt by many members . . . It is essential that members’ trust in the scheme is restored and maintained.”

Hero Jane Hutton

Jane Hutton

The fearless Jane Hutton stood up to USS and whistle blew to the Joint Expert Panel (an independent group set up to moderate the dispute). To quote Jo Cumbo in the FT

She highlighted a discrepancy between the regulator’s published position on discount rates and how the watchdog’s views were presented in the USS consultation document.

The regulator’s January email to Mr Rowney (funding officer for USS)  was copied to David Eastwood, chair of the USS trustee board and Bill Galvin, group chief executive of the scheme and a former chief executive of the watchdog.

But the email was only shared with the entire USS trustee board in May after Prof Hutton sought confirmation from the regulator about its position on discount rates. In the email, the regulator did not insist that the USS correct the wording in the consultation document, but asked the scheme to “consider doing so”.

The document was not altered.

The regulator is separately probing claims by Prof Hutton that she was obstructed by the USS trustee board from establishing whether the scheme exaggerated the extent of the plan’s deficit in the 2017 valuation. The USS estimated the deficit at £7.5bn at that time.

Now threat of more strikes

The Trinity College bursa has written an open letter to the College’s dons, which includes this statement.

As a responsible employer and as a charity, the Trustees have a duty to protect the College from risks and mitigate those as far as possible. By removing the LES [last employer standing] risk, the Trustees have helped ensure the College’s continued long-term existence as an academic institution and charity….

You can read the  open letter to the fellows of Trinity College Cambridge on Mike Osuka’s blog  though Mike wants me to point out that the blog is not the open letter!

The perceived threat to Trinity College is based on insecurity created by overblown deficits. Even the Pensions Regulator, a most conservative body, has had enough.

There is talk of Cambridge fellows boycotting teaching Trinity students next term

The UCU is now threatening to take fellows back on strike unless there is a change in position at the USS to fall in line with the proposals made to it by the JEP – the independent moderator.

The students will once again suffer. There is no doubt in my mind – and I speak as a parent of a son who has suffered a year of disruption at Cambridge – that the USS are causing unnecessary problems which are leading to disastrous consequences.

It is quite possible that Trinity’s action could prove contagious and that the USS gets what it has warned against, a scheme unable to be supported by its sponsor. If this happens then the USS will be the architect of its own demise.

Who suffers?

It strikes me that while university teachers suffer, students suffer and the tax-payer suffers, USS is not suffering at all. Salaries at USS continue to be paid at very high levels. USS staff continue to parade around as industry authorities and certain elements of the pensions industry continue to hold them up as upholding the principles of prudence, caution and of financial economics.

There doesn’t seem much suffering going on at USS.

The asymmetry of suffering in all this is only too obvious, as is the asymmetry of information.

There is something deeply wrong with a system that allows USS and its Trustees to behave as they do without sanction, whilst all around them pay a high price for their less than transparant behaviour and their promotion of a deficit which is quite obviously a fib.

Team Fib


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What does SJP “sacking” Woodford mean?

The relationship between Neil Woodford and SJP is over, SJP sacked Woodford as a manager – that is clear. Since 40% of the funds Woodford managed were for SJP, that makes for a difficult business problem for Woodford, he will have to adjust his business. I am told, by IFA friends on twitter that SJP were not investing in a pooled fund – run by Woodford, but in what is called a segregated mandate, where SJP has the right to hire and fire the managers of the assets but does not have to liquidate the funds if they do so.

This is comforting , the replacement managers of the SJP funds do not have to sell anything till the time is right, and then they only “have” to sell , if there is an imperative to do so. It is becoming clear that the FCA, the Bank of England (through Mark Carney) and SJP (through their own fund governance) feel that something went wrong, but that is all we know.

There is speculation as to how much change the appointment of a new manager will bring.

As with football teams, a change of manager can bring wholesale change or a little bit of tinkering .

But what I had not appreciated, and here I am just showing ignorance, is that not just the customers but the SJP advisers have very little control over who is managing the money, that is a matter for SJP’s fund governance team and advisors.

Which explains Al Cunningham’s comment at the top of this blog. Where Hargreaves Lansdown clients are responsible for deciding on whether or not to own Woodford funds, SJP clients give discretionary control to St James Place as to who manages their money. Quite different models indeed.

So SJP sacking Woodford means more for Woodford than for SJP and its clients

I’m happy to stand corrected on this. I am learning as I go, but this I would say in my defence. It is very far from clear from the press reports about the implications of the change in SJP’s managers and while I am sure SJP are communicating to their clients, they are not communicating to direct investors in Woodford funds (through Hargreaves and elsewhere).

I remain critical of SJP on its fund governance and in particular on the timing of the sacking which happened only once Woodford had to gate his fund because other investors had voted with their feet.

If SJP owned 40% of assets under Woodford management, how had it not dealt with the problems of illiquidity earlier? It is in the nature of segregated mandates that the entity awarding the job mandates how the fund is managed and has the responsibility to ensure that job is being properly carried out.

That SJP only took action once the gate had slammed following the withdrawal of £260m by a Government body, suggests that  SJP were bounced into action.  This I find really surprising as it does not suggest an orderly investment governance process.

Woodford did not become a bad manager overnight, I am told by those who know him that he has been aware of the risks of holding high amounts of illiquid stocks in funds that may need illiquidity and he has lived with this risk for some years. I assume that when Woodford was appointed by SJP they knew of this risk too and that particular controls should have been in place to guard against the problems of the past few months.

I cannot avoid the conclusion that not only has SJP let itself and its clients down, but it has failed all Woodford clients, first by not managing its mandate better and secondly by not sticking with its manager when the going got tough.

Too much transparency?

In a very cute series of tweets , Matthew Bird points out that Woodford was a victim of being too public about what he was investing in.

Now this really is an issue for the Regulator. As I have been writing over the past two weeks, the best way of getting engagement is to tell people where the money is invested.

But if in demonstrating that (an admirable feature of Woodford’s and Terry Smith’s management style), the fund’s investments are shorted by the market, then a number of problems arise

  1. Companies become wary of being quoted of the publicity
  2. Managers become wary of transparency
  3. Investors are returned to darkness and to all the shady dealings that opacity can bring

If what the FCA concludes is that fund managers cannot be transparent about what they hold for fear of short-selling then we have a quite different regulatory issue.

Problems with the fund management model

I find myself reluctantly returning to the position of Robin Powell, the evidence based investor. Chasing returns by changing managers, changing asset allocation , changing investments is a mugs game. Here is Matthew Bird again

Which brings us back to John Kay who asks fundamental questions about the fund management model and finds no answers.

It seems to me that being a top fund manager is about as thankless a task as being a top football manager. You will have your moment in the sun but you are unlikely to avoid sunburn, for every Alex Ferguson of Bill Shankly there are 20 once-loved football managers with reputations in tatters. Today’s Klopp is tomorrow’s Morinho.

For an interesting (if speculative) view of the reasons for SJP and Woodford’s falling out, read Matthew Vincent’s article in the FT Lombard column

If anything, Mr Woodford’s relationship with St James’s Place had to end because the duo had become fundamentally incompatible: St James’s Place an ever more conservative City type, but Woodford still the maverick. Their mistake was to stay with each other for so long.

Learning from experience

Well I’m learning as I go on this – thanks to Al Cunningham , Matthew Bird and several others for setting me right and helping me out (even on the little things like names)

The article has been edited slightly! But the thrust remains the same.

  • Employing conviction-based fund managers who buy and hold is a good thing
  • Transparency of holdings is a good thing.

If Woodford broke the terms of his mandate with SJP, he deserved censure and ultimately sacking. Strong governance of segregated mandates is a good thing and pooled funds need even greater fiduciary oversite. But there is no evidence that he did.

If I am learning about how managers are employed, I can be expected to be pulled up and corrected by good people like Al and Matthew, I learn from being corrected and I hope that those who read my blogs learn from my mistakes too.

What is a bad thing is that many investors are being mucked about and losing considerable amounts of money to the short-sellers because of the collapse in confidence in Neil Woodford and for that – I have to hold those who employed him partially responsible.

If we award managers mandates as long-term investors and sack them when the going gets tough, there have to be good reasons and so far we have not seen those good reasons from SJP. It’s left to Matthew Vincent to speculate that perhaps SJP were asking Woodford to do the wrong job.

Fund analyst Brian Dennehy points out that, in the last month, WEIF was down 8.10 per cent but the supposedly more liquid blue-chip SJP UK High Income was down 8.83 per cent. As a result, the return for SJP clients has been -3.16 per cent since July 2014, while for WEIF investors it has been -1.42 per cent.

The FCA clearly want to look deeper into this and they are right to do so. We need to have confidence not just in the managers, but in those who employ them. What is clear from learning about SJP , is that it is they, not their advisers or their clients – who call the shots. If Woodford only managed to his mandate, the buck stops with the FCA,


Posted in FCA, governance, pensions | Tagged , , , , , , , | 10 Comments

Getting youngsters saving more


Telling youngsters to save more is a waste of time

It’s been a sad 48 hours on twitter watching the wolf pack turn on Paul Claireaux for his cappuccino blog – where Paul postulates that a youngster could have a markedly better retirement for giving up a cappuccino a day and saving the money into a pension pot.

There are many other versions of this argument – it used to be done with packets of fags and NEST are trying it with their sidecar. All are versions on  nudge with a sexy theme disguising a fairly tame idea – “save what you don’t miss”.

Unfortunately people do miss their coffee and fags and low-paid people don’t always stay in the sidecar saving employment. Anyway, the amounts saved rarely amount to enough in practice and the grand plan depends on things that don’t often happen – continuity, perseverance and the right set of financial assumptions.

Oh and if we can’t be bothered to give low-earning people the promised incentives to save, who are we to preach the value of saving anyway?

My problem with financial education is that it’s usually those that have the money teaching those that haven’t how to be like them – and young people don’t necessarily see people like me as role models. Even if they do, the last thing youngsters would admire in a baby boomer was his or her pension.  Financial education is at heart paternalism and youngsters don’t take kindly to that.

There are literally hundreds of tweets on my timeline arguing about cappuccino pensions. What a waste of time – when that time could be spent on getting a better futures

Spending on a better future

The paternalism of financial education usually manifests itself in a demand for self-denial called “saving”. Telling people to save doesn’t go down well but showing people how to spend does – it is the basis of advertising and behaviourally it is a much more effective way of going about things. Spending on a better future begs the question – spending on what?

By a strange coincidence, I am doing three presentations today , which will all incorporate this message. This morning I’m talking with a high street bank on how to get millennials saving more, at lunchtime I’m talking with the Equity Release Council about helping older people spend their savings and this afternoon I’m talking with payroll people about promoting workplace pensions.

In all three talks I plan to focus on spending not saving and on making use of assets like pension pots and houses and work income to spend on a better future.

We all renters

We live on borrowed time, our lease of life expires not when we choose but when we are chosen. Many young people are renting and have no plan to buy, they own less and less, subscribe to more and more. Ownership is not even an aspiration for many millennials.

For younger people, the future seems out of their hands and they are determined to take control. We see this in their determination to reduce emissions and decelerate global warming. And if we ask people about their savings , they want to know where their money is invested and to take control of investment decisions. Once more – watch this video.

In a world where we cannot or don’t want to own, we can at least steward.  The planet is ours to save, let’s spend on a better future.

Turning savers into spenders , spenders into stewards

Our time would be better spent showing people how their savings are invested and giving them the chance to make positive decisions on how their money is spent.

I mean by spent – invested, but people need to understand what is happening to their money after it leaves their bank account, their payslip – even their bricks and mortar.

Giving people a clear picture of what happens to their money is critical to keeping their interest.

Instead of issuing people with annual statements full of financial jargon and compliance warnings, we could be reporting on how money has been spent. The only fund manager I have known who does this is Terry Smith – and look how successful Fundsmith is.

And of course, when we have turned savers into spenders and spenders into stewards, we have changed the nature of saving for the better.

We do not need wealth , we need to pay the rent

This blog challenges the conventional view of pensions as wealth and replaces it with a view of pensions as a way of paying the rent. This is the new reality for many youngsters.

We should stop confusing the need to pay the rent with ownership, stop suggesting that we can dive into our pension savings to put down deposits on houses.  We need pensions to pay the rent – not to amass housing equity,

We need to stop thinking of pensions as a means of becoming wealthy and start thinking about our responsibility to each other not to become a burden in later age. Investing in our retirements should be a deeply satisfying – socially responsible behaviour.

Appealing to the responsible instincts of young people is much more likely to win their hearts than appealing to their greed.

If we are to get people to take pensions seriously, especially young people, we need to forget  about swapping pensions for home ownership.  We need instead to get people using the collective power of our pension pots to do good things. This starts one person at a time.

So when I talk today to that big high street bank, and the equity release council and to the payroll  community, I’ll be talking about this paradigm shift that is needed to get people saving more. I hope to meet some of you during the day!




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Millennial fightback

The greatest current threat to motor manufacturers is that people no longer want to drive. The second biggest threat is that people no longer want to own a car. That’s the message that comes loud and clear from an article in the FT that features the Volvo car stand with no cars on it.