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.

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

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


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

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


Posted in pensions | Tagged , | 2 Comments

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.

Screenshot 2019-06-04 at 05.43.43

I have to admit a reluctance to get in my car myself, my personal mileage was below 5000 miles last year and I keep my car out of nostalgia and for the personal number plate S4 HEN – which tells me who I’m owned by!

Car’s are not alone – what about houses?

The value of owning a record collection, of philately , of wine cellars – all seem to have dropped. People who I talk to who are under 35 no longer value themselves in terms of what they own. I suspect that we are returning to a different set of values that may be rather less materialistic and (dare I say it) more spiritual.

I suspect that houses are also way down on value. Owning property is certainly not a priority for my son (who was bullied into getting a driving licence but who has never used it – other than as identification).

Is this behaviour a result of pragmatism, or does it continue a trend we are seeing?

If young people fall out of love with home ownership, what will this mean to the value of older people’s housing stock? Will the equity on which so many of us rely for financial security prove illusory?

A house is only worth what someone is prepared to pay for it and as we age, there is a very real chance that ownership rates amongst older people will fall. The lack of income arising from pensions will inevitably place greater reliance on equity release and the lifetime mortgages which pass property from self ownership to the ownership of lenders.

Milennial fightback

There is only one way for millennials and that is to take control. Historically that has been through securing ownership of cars, houses and possessions.

I don’t see the urge to control today among younger people who are quite happy to stream services and use them on demand.

Instead of owning, millennials are investing heavily in themselves. They are taking jobs that are interesting and rewarding in themselves, not just a means to get a mortgage.

They are buying into training and taking an inordinate interest in their personal finances. Bloggers like Iona Bain – of young money – are the new Martin Lewis’ but they are talking to a new generation more interested in how their money is invested than what to buy with their savings.

I am dubbing this “millennial fightback” as it is their way of dealing with the impossibility of competing with the baby boomers on the baby boomers terms.

A car stand with no cars

The motor industry is first to feel the wave of change. The shift towards car- leasing or in the most extreme – Zip car – is illustrative of a new way of dealing with ownership – that moves from the balance sheet to profit and loss. Kids no longer want a balance sheet weighed down by personal possessions which they see as liabilities as much as assets.

This has profound implications for the savings industry too.

We must recognise it is not the valuation of an asset that is most important to a young person but its utility under ownership.

People are already moving away from conventional measures of worth (the valuation) to a different measure “the value of their money”. If you start valuing your money by what it is doing , then your interest is in the investment itself – what it does – not what other people will pay for it. People are interested in cars as a service , not as objects and property and even savings  may follow.

How this plays in pensions

There seem to me to be two competing views of pensions . Those who see pensions as part of wealth are owners. Those who see pensions as a means of doing things, are renters.

We do not of course own ourselves freehold, our lives are on leases which expire when we do. Younger people do not even take for granted ownership of the planet which they see as under existential threat, they may possess a blighted planet when their parents are gone.

This sense of possession rather than ownership could mean a reversion to a view of a pension as something that does something rather than as a balance sheet item.

Currently the  “pensions are wealth”  brigade dominate the agenda and have pretty well excluded the idea of pension as a utility.

But that is likely to change over generations. The question for pension providers today is how to ride both horses in mid-stream.

horses stream

Posted in actuaries, advice gap, pensions | Tagged , , , , , , , | 7 Comments

Pension PlayPen lunch – “are we better off out?”

Pension Play Pen lunch – Monday June 3rd 2019

Brexit and Trexit

Brexit and Trexit are in the news, we all know about Brexit – some know about Trinity College Cambridge’s unilateral departure from USS (Tr-exit). Is Trinity College better off out….. and is Britain?

Does collectivism have a role in today’s world?

Should the strong shoulder the weak?

Who picks up the bill if they do?

Is the bill worth worrying about?

The Pension Play Pen meets as it has met the first business Monday of the month for the past 10 years. We will this week be downstairs at the back (not upstairs) in the Counting House and we will be meeting at 12pm, eating at 12.30 and breaking at 1.30 for a more formal conversation.

All are welcome, the cost will be c £15 shared between us and I look forward to seeing you in the Counting House at Monday lunchtime.

Posted in pensions | 1 Comment

We all love disruptors till we feel disrupted!


Yesterday I wrote a blog in favour of annuities and Britain’s favourite annuity broker – Retirement Line. My argument was that some of the best retirement income ideas and one of our best brokers are unknown.

What a hullaballoo ensued! My blog was unbalanced

My blog said nothing new


My blog was an advert

I was monetising my blog


My blog wasn’t worthy of my blog

My blog was deeply misleading


Just what is wrong with Retirement Line, Annuity Broking and advertising a service?

I get the feeling that Retirement Line are eating someone’s lunch and that I’ve just walked into an advisory war-zone.

I’ve no idea why my post should be reckoned deeply misleading, I do believe there is a strong case for fixed term annuities as I reckon annuity rates are likely to go up, not just when we see QE unwind but because mortality assumptions are changing in the direction of better annuity rates.

I appreciate that fixed term annuities carry certain risks which are advertised in the link to the MAS guide which you can follow here. If anyone thinks that annuity rates will go down , they can lock into lifetime annuities today. They would do well to use the open market option offered by Retirement Line and to make sure they get any enhancements available to them.

That I didn’t know about Fixed Term Annuities, suggests that most people don’t know about them. Most people don’t know much about annuities at all, which is a shame as they suit a lot of people who want a wage for life.

Research from Aon and from Tilney BestInvest suggests that annuities remain the best way for many people to turn their pension pot into a pension income.

What is wrong with adverts?

My blog is a series of adverts. I advertise Pension PlayPen, AgeWage, First Actuarial , FABI, CDC  and annuities.

Some of these earn me money (AgeWage, First Actuarial) some lose me money (Pension PlayPen) and the remainder are advertised out of my conviction.

People want conviction. If along the way, my conviction gets in the way of your business model then so be it. We are unlikely to work together!

If my blog did not have the courage of my conviction, no one would read it. I will continue to promote ideas and businesses that I support and Retirement Line is a business I support. I may well speak with them about my pension pot if I cannot see a way to exchanging it for a CDC pension.

What is wrong with adverts?

Feeling disrupted?

If you are one of the people who feel angry about my blog, ask yourself why.

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If you feel I have been disingenuous, as Brian Gannon did, then you can say so in the comments on my blog. I don’t edit those comments or take them down – unless they are spam

But the passion of your response is probably born out of insecurity with your current views or those of your business and you should ask yourself whether you’re angry about my being misleading – or my being challenging.

CDC and Annuities are linked in several of the responses I’ve got and I suspect that both are seen as a threat to advised drawdown. I don’t think that advised drawdown is under threat, there is high demand for it and low levels of supply. At the moment, advisers can make a good living out of it with relatively little challenge. It is not a particularly competitive market and the FCA knows it.

CDC and Annuities have the potential to challenge advised drawdown and the margins it is paying fund managers, platform providers and advisors.

If annuities  are offered to ordinary people by Retirement Line then that is good. Retirement Line tell me they refer many inquiries on to advisers for help on drawdown , equity release and other advised products.

Rather than feeling angry about Retirement Line and the ideas in my blog, advisers should be beating a path to Fletton and join the increasing number of intermediaries working with David Slater & Co.

Posted in pensions | 1 Comment

Risk-taking , ground-breaking academics in our universities

Jo Grady

I have been impressed by the way academics , through their unions, took on university employers and the received wisdom of the pension industry and refused to let their defined benefit scheme close to future accrual.

I’m pleased that one of the leading lights in their demand to keep USS open was last week elected to General Secretary of the UCU – the university staff union. Congratulations to Jo Grady.

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As her twitter header reminds us, the USS dispute has asked fundamental questions not just about pensions but about affordability and groupthink..

Jo’s points are central to the arguments that Hilary Salt and Derek Benstead have been putting forward to UCU. Hilary was quite explicit at the First Actuarial conference in challenging the Pension Regulator’s position on self -sufficiency (since modified to partial dependency). Pension Schemes do not have to behave as if they were insurance companies, unlike insurance companies , they can call upon a sponsor – in the case of USS a sponsor with a history going back 600 years.

Risk can be taken collectively

One of the sadnesses of the University dispute over pensions was that it broke the mutual bonds between trustees, employers and members. Since the dispute we learn that one of the Trustees – Professor Hutton – had to whistleblow to get information from the scheme which she feels would have allowed her to push back against the reckless conservatism of scheme funding.

Now we learn that one employer, Trinity College Cambridge, is seeking to break from USS because it feels too tied by the obligations of mutuality. This too is very sad.

When those who have greatest strength (strength not earned but endowed) , choose to compete rather than collaborate, we see the beginnings of the end of Britain’s academic greatness.

The capacity for risk, that is inherent in our university system, depends on established institutions such as Trinity, enabling new risk-takers to come through. If we lose the solidarity of the pension consensus, we lose much else besides.

Jo Grady 2

A return to good order?

Much has changed in  University pensions, the JEP reported that the information that Professor Jan Hutton had asked for, would – had it been disclosed – confirmed that the USS position on de-risking was unnecessary, that funding of USS need not have increased to the proposed levels, that the scheme was affordable and that the teachers had reason to strike.

Despite the employers (generally) accepting the JEP position, the USS continues to follow the accepted wisdom – espoused in the Pensions Regulators current strategy, that schemes should seek to  be funded independently of employer’s future contributions.

This may work for the PPF – where there is no economic interest in disconnected employer paying levies – but it does not work for the USS, where the bond between employer and staff is to a high degree – through the pension scheme. The principal of deferred pay assumes just that – ongoing employer contributions to USS.

It may be too late to restore the principles behind pensions as deferred pay to the provision of  private sector DB , but it is not too late to save further value destruction in the name of “de-risking”. Indeed there is much to be gained by reintroducing the concept of risk-sharing into pensions – rather than dumping all risk on individuals.

Without the tremendous determination of the UCU, Jo Grady to the fore, the buds of risk-sharing we see in the adoption of CDC by the DWP, would have been frozen.

Jo Grady 3

Better off together

This country funds universities through taxation and  student grants. Universities are able to pursue greater outreach by their entrepreneurial activities – including funding many start-ups that are going on to drive our long-term economic growth. Whether in science, the arts , engineering or economics, we rely on our academics to drive progressive thinking – to be a force for good and to encourage risk-taking.

Without risk taking, the great experiments on which our society is built, would not have happened. Without universities , the science that has driven Britain’s pre-eminence would not have happened. We need to pay our thought leaders to lead and we do not have to make them the CIOs of their self-invested personal pensions.

University academics are no more ready to manage their later life finances than postmen. They are built for better things.

We have trustees a plenty who can manage schemes that give them scheme pensions or “wages for life”.

This is not to discourage those in USS or Royal Mail who want to become pensions experts. Sam Marsh, Mike Otsuka, Denis Leech, Jane Hatton – indeed Jo Grady are all quite capable of managing USS as Member Nominated Trustees. They undoubtedly could run their own pensions but choose not to. They realise they are better off together

Jo Ogrady 4

As an entrepreneur – I do not need or want to manage my own pension

There are some who argue that their business is their pension, they are taking a great risk relying on their entrepreneurial activities to fund their later life. They are entitled to take that risk – but I am not with them.

I use my endeavours as a businessman to create for myself an income for life and I know that when I have achieved what I want to do with AgeWage, I will be able to move on to a different kind of living – I will call it retirement. Whether I ever get to the point where I fully retire- I doubt – when my father gave up work – he gave up the ghost and I may be like him.

But my father had an NHS pension and I have a Zurich pension and it keeps me going, helping me so I don’t have to drawdown on shareholders funds to meet my financial needs. I am also grateful for the work and pay I get from First Actuarial (including their pension contributions).

To a great degree, the USS are not just struggling for academic staff but for us all. We want to be free – free of financial worries in retirement – for most of us that means having a properly funded pension. Jo Grady and others are holding the red-line for their scheme and raising the bar for the rest of us,

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Retail platforms – a boat worth missing?

I hadn’t realised until yesterday that the FCA has a SIPP and Platform team in the Retail Investment supervision department.

For most of us , the idea that we are buying into a platform when we save into a pension is counter intuitive. Most of us don’t stop to think where our money is going , let alone embrace the concept of an investment platform.

I remember at Port Talbot, watching the eyes of steel men glaze over as advisers talked to them of the merits of the various platforms they were being offered – platforms mean different things to different people but if you work in a steelworks – it has a particular meaning which does not translate into money matters.

How platforms changed retail

Clive Waller has been dubbed Mr Platform (as John Moret is called Mr Sipp), both get their names from understanding early in their gestation, that the Self invested personal pension and the platforms they provide, could radically redefine the retail financial services market.

When Ian Taylor and Transact started offering advisers the opportunity to put together their own funds using Transact’s platform technology, the IFA moved from distributor to manufacturer and vertical integration had begun. Now a few other entrepreneurs have followed and there are rival platforms to Transact – Novia, Nucleus, Cofunds, AJ Bell and a few insurers who have bought into the technology. Platforms are immensely powerful making their founding entrepreneurs every rich.

Add to that list a Kiwi – Adrian Durham – who brought FNZ to these shores and you get a reasonably complete picture of the platforms that IFAs use to make a living and build embedded value in their businesses.

Any IFA reading this will smile and ask me to tell them something that they don’t know. Anyone other than an IFA, will marvel that platforms and the SIPP tax wrappers that come with them – are important enough to merit a department of the FCA.

Platforms may not have changed the world but they have changed the dynamics of the funds industry.

Institutional platforms miss the boat

I noticed that Professional Pensions ran an investment platform award at last week’s shindig in Park Lane. Mobius won the award, a company that most people have never heard of. I was head of sales for a time for its previous incarnation (Investment Solutions) and since I’ve left it’s stopped pretending it can sell funds of funds to investment consultants and learned from retail platforms to empower consultants to do that for themselves.

Mobius is allowing institutional advisors to offer vertically integrated products to their clients and to benefit from those products precisely as the retail platforms did. The difference is that rather than being a pure funds platform, Mobius is an insurance platform and the funds it offers come wrapped (reinsured) by Mobius and have to obey the permitted links rules pertaining to insurance companies.

These rules prevent the insurer offering inappropriate investments to its policyholders. Permitted links are currently under review by the FCA. 

The review has been prompted by protests from insurers and advisers that insurance platforms cannot provide the flexibility to advisers available from retail platforms and in particular cannot offer what is referred to as “patient capital”.  The issues are to do with illiquidity, particularly the illiquidity of property and other forms of infrastructure investment.

Institutional platforms like Mobius have not been able to be as racy as their retail cousins because they use reinsurance wrappers which require them to abide by permitted links regulations.

Meanwhile the non- insured institutional platforms offered by custodian banks, have failed to pick up on the prevailing trend toward vertical integration and have missed the boat.

 A boat that may have been worth missing

Many of the SIPPs and platforms that they use, are now polluted with toxic assets like Dolphin Trust (that I discussed yesterday).

Allowing advisers to shove rubbish into your SIPP and on to your platform is a risky business. SIPPs have argued in the past that they cannot be responsible for what regulated advisers choose for their clients and that they don’t have a supervisory role.

Because the platforms don’t reinsure funds – the permitted links rules don’t apply and there is little or no friction.  This has led to many funds and vertically integrated funds of funds appearing on reputable platforms , going belly up and leaving the platform, the SIPP and the adviser with a lot of explaining to do.

Typically the adviser walks away and either sets up abroad or phoenixes into another entity in the UK leaving the SIPP manager and the platform holding the baby.

It is the FCA’s job to find somebody accountable for what is happening and that is proving very difficult.

It is extremely difficult to recover the money that is lost from a fund failure and often the cost of recovery wipes out any gain to the investor from the recovery process. That is why retail investors have direct access to compensation from the Financial Services Compensation Scheme (FSCS).

But FSCS – like the PPF – needs protecting, There are only so many claims that can be passed on to other advisers , platforms and SIPPs before the costs of claim make the whole shebang unviable.

Permitted links may have saved insurance platforms from the agonies that retail SIPPs and platforms are waking up to. The custodial banks that refused to play, may feel the boat  was worth missing.

Hargreaves Lansdown and St James’ place

In different ways , these two organisations have redefined the way that retail platforms can operate successfully.

Both have unashamedly targeted “wealth” and kept a tight ship. To follow the conceit, their boat had pretty exclusive passenger lists and their crews make sure that those who are onboard are well vetted.

Hargreaves Lansdown has offered an execution only service that appeals to experienced investors who don’t want to use advisers while St James Place offers an advised service where the cost of advice is born by the platform and passed back to investors through higher fees.

Both models are highly popular, both companies have high levels of confidence among their customers, but their boats depend on exclusivity.

A boat for all?

I sense when talking to regulators , that they would like to see the kind of model that works for Hargreaves, SJP and for the wealth managers who use platforms responsibly, available to everyone.

We are beginning to see mass market products emerging. Pension Bee could be called a “boat for all”.  Surprisingly – the workplace pensions have yet to realise their position as mass market pension providers and are failing to build the level of trust and engagement that the Pension Bee-keepers are creating with their SIPP- holders.

Organisations like Smart Pensions are getting there and it’s easy to see NEST and People’s providing a Pension Bee type service in time. The large insurers are generally caught between offering a direct service or relying on advisers. Some – such as Royal London, have decided to work with advisers exclusively, others -such as Quilter – are looking to follow the route pioneered by Allied Dunbar and now operated by SJP, the adviser platform.

All of these models are looking to provide a boat for all but none have yet found the way to meet people’s desire for a wage for life. Retail pension products remain anything but pension providers.

The future is in “Customer need”

I remain obdurately of the opinion that the boat for all is a boat that treats everyone as one and offers benefits collectively through some form or other of CDC.

I don’t see CDC as an institutional produce -even though its first UK incarnation – Royal Mail – will be an institutionally sponsored and devised product.

I think that the trust based pension structures – the master-trusts – are ideally suited to using the technology of platforms to deliver a simple one size fits all collective pension which still allows people the option to opt out into the flexibilities of SIPP platforms.

Indeed – the ongoing dynamic for pensions may be between a choice between the simplicity of a wage for life and the complexity of the DIY SIPP.

I mentioned this to the FCA’s Charles Randell when I met him last month and I’ll talk of this again when I meet the FCA’s pension team in June.

I believe that there is a middle ground that brings collectives and retail platforms together and it can be best defined today by “Customer Need”.

We need platforms, tax wrappers, advisers and regulators that recognise that customers need the choice not just of SIPPs but of not having to take any choice at all. CDC offers that other choice,

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

Grand designs from Dolphin Trust

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If you want to invest in Dolphin Trust , you can still do so by following the link behind the advertisement above.(though the telephone number doesn’t work and you’ll just be handing your contact details to a sales team if you fill in the capture form.)

The people behind BPI are Rajan Aggarwal and Mithun Vagdia. I’m sure they’d be pleased to talk to you about Dolphin Trust.

You can even watch a video advertising Canisius Careee, one of Dophin Trust’s investments. These are “real pictures”.

It’s property backed – it’s German – you get a first charge  and the bloke doing the voiceover sounds like someone you’d have a drink with – what could possible go wrong?

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Remember – these are “real pictures’ (even if the video is 2 years old).

Alternatively you can contact the Landlord’s Pension and find out that the truth about Dolphin Trust is exactly as Best Property Investment would have it. The “truth exposed” turns out a ringing endorsement after the Landlord’s “due diligence”.

You can contact Landlord’s Pension consultants like Simon King, who promises that he “can visit you at your home or office to help you invest in property securely and profitably using a pension”.

You can meet the whole team here

Neither the Landlord’s Pension or BPI appear to be FCA regulated.

The reality is rather different

The true narrative behind the Dolphin Trust scam is brilliantly told on Radio Four’s You and Yours program.

Listen to the program here

You can follow the sad stories of the victims through this BBC article by Shari Vahl.

It’s a narrative that – told by an unregulated investment salesman- proved irresistible to thousands of people with savings and pensions.

I know who these salesmen are, some are in my Pension Play Pen linked in group and one or two are actually connected to me on linked in. They are integrated into the financial advisory community but they are not regulated.

Here are some more of  the people who have been selling Dolphin Trust

There’s Tim Blogg (@tractorboy on twitter)

There’s James Hall

There’s William Butterwick

and in Ireland , there’s Cormac Smith

Then there’s the man who’s responsible for producing financial accounts for Dolphin International- Tom O’Connell.  The problem is there are no recent accounts

And of course there’s (ex) CEO Charles Smethurst , the man who promised to send a million dollars every day to Singapore to pay back the Singapore investors.

This is the video used to explain what Dolphin was about to Far Eastern Investors

Here’s Charles being interviewed in 2012 about Dolphin. Explaining how secure Dolphin is to investors. It includes at minute 6 a detailed explanation of the exit strategy.

Where there’s no financial capability – there’s Dolphin Trust

You can of course find out more about Dolphin Trust and its nefarious behaviour by visiting Angie Brooks’ pension life site.. Angie has been campaigning about the risks of investing in Dolphin (now German Property Group) for some time.

In September 2016 she wrote about  the exposure of the Trafalgar Multi Asset Fund

After the disasters of failed pension schemes Capita Oak, Henley and Westminster (aggregate of £20 million lost to over 500 victims through investments in Store First store pods – wound up by the Insolvency Service), there are now concerns about the suspended Trafalgar Multi Asset Fund of £20 million.  The board of directors have published the below report and are investigating how this fund came to be mostly invested in one asset: Dolphin property development loans.

In fact, Dolphin was one of the assets of Stephen Ward’s London Quantum scam which is now in the hands of Dalriada Trustees (appointed by the Pensions Regulator).  Dalriada stated a year ago that Dolphin was not a suitable investment for a pension scheme and yet the investment manager of Trafalgar has invested most of the fund in Dolphin.

The unlicensed adviser to the victims was also the investment manager of the Trafalgar fund.  The advisory firm, Global Partners Limited – which then changed its name to The Pension Reporter – was an agent of a firm called Joseph Oliver and was not licensed to give pension or investment advice.

It seems that certain vulnerable people are condemned to suffer scams such as Dolphin because no-one is prepared to shut down firms like Dolphin and stop the salesmen selling this rubbish from doing so.

Dolphin Trust is not new news, but the You and Yours expose makes doing something about the sales ecosystem that still exists in the UK , that much more possible.

In the couple of hours that I’ve been looking at Dolphin Trust, I’ve noted that Dolphin Trust was recommended by Darren Reynolds and Andrew Deeney of Active Wealth Management to people he was advising on BSPS benefits

Andrew is now at Fortuna Wealth Management having left Active behind him. Darren Reynolds has not been heard of since trying to explain the charges on the pension solution he sold to those transferring out of BSPS.

I’ve noted that Dolphin Trust was also linked to FCA regulated advisers Gerrard Associates, which like Active Wealth Management – used its regulatory status to scam the vulnerable.

Last weekend I said in the Times that it is time the FCA and tPR got on the front foot and stopped the ongoing sales of unregulated investments and the kind of fractional scamming sold by Active Wealth Management under the cover of legitimate SIPPs.

I will say it again, as Baroness Altmann said on You and Yours. It is not enough for the FCA to know what’s going on, it’s got to stop what’s going on and that means making it clear that those who have sold these funds in the past, don’t sell funds in the future. That means just about everyone mentioned in this blog (though I exclude Ros, Angie and the presenters of You and yours!)

Of course this isn’t an inclusive list and yes there are probably hundreds of other salespeople both in the UK and abroad who’ve sold Dolphin Trust and would sell similar as long as it had a 20% sales commission sticker on it.

And if you go back to the top of this blog, you’ll find the people who are still promoting Dolphin Trust on the web and – guess what – they all live in this country and can be contacted using the links supplied.

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

British Steel – workplace pensions go missing


Maria Espadinha’s  excellent article in the FT’s Advisor clarifies to financial advisers that were Greybull to go into administration, there would be no impact on the new BSPS.  It’s a timely reminder as there will undoubtedly be increased vulnerability amongst traumatised British Steel workers in Teeside and Scunthorpe.

The Facebook page that members of the new BSPS use to talk with each other , post her article to clarify the position for pensioners and deferred members of the scheme. The scheme does not depend on Greybull’s money and therefore it is business as usual for BSPS. As ever, it is Stefan Zait who provides the information.

Such articles keep the lead generators stay away from these sites.

British Steel’s Workplace Pension

The FT article ends with sombre words from Paul Stocks

“there may be a little relief that their DB pensions are no longer at risk from British Steel’s potential failure, for the majority this will be scant comfort given that their livelihoods (and those of families, friends and neighbours) are on the line.”

With the jobs come pensions , not the defined benefit accrual of yesteryear but a healthy contribution into a Legal and General workplace pension that covers the staff in the Teeside and Scunthorpe plants.

It is a good plan with very low charges and a high contribution rate (relative to auto-enrolment minima).

The plan , like Tata’s equivalent (which is with Aviva), is little discussed but it too is under threat from the very probable collapse of Greybull. The plan was funded to offer some continuity with what came before. But if Greybull’s business does get taken over, it is only too likely that what will replace the current contribution rate, will be something a lot less generous.

It is in the nature of modern pension policy that the minimum viable product is set at the bare bones auto-enrolment rate.  Let’s hope that Greybull survives, but if it doesn’t, let’s hope that the jobs of the British Steel workers are preserved – with salaries and pensions unreduced.

Putting staff last

We have now reached a point in corporate management where pensions are considered as “costs” rather than “benefits”. The business of private equity firms such as Greybull is to reduce costs, part of the attraction of British Steel to them was that it came without the long-tail pension liabilities that stayed with Tata.

The sorrow is that even with their pension-lite staff liabilities Greybull has not been able to turn British Steel into a viable business.

As with Monarch Airlines , Comet and Ryland Snooker Halls (all funded by Greybull Capital) the debt that has been pumped into British Steel has been created by the Greybull management and it looks very likely that that debt will be the first credit in line , if British Steel crashes.

As this article in the Guardian points out, the financiers  of Greybull are unlikely to have suffered if British Steel goes under.

The people who will suffer as Paul Stocks reminds us – are the staff.

Workplace pensions matter too

There is currently protection for defined benefit promises through the PPF, but there is no protection to employees for the loss of future defined contributions into workplace pensions.

The implied contract between employer and staff to meet pension contributions lasts only as long as the employer chooses to fund both salary and pension.

While the funds which have been built up to date are safe, the future pensions that they buy are now under threat as the jobs that fund the pensions are axed.

It would seem that at British Steel, the future of the British Steel workplace pension is so small a matter as to not be mentioned in any article I have read on the impending closure.

But the workplace pension does matter, it comes with the job and the funding of the workplace pension reflects the importance historically that pensions played to steel workers.

A pension is a pension

If you are a British Steel worker, you will probably not be thinking about your workplace pension right now. You will hopefully be consoled by Maria’s article that your rights under new BSPS are secure. But your rights to future contributions into your workplace pension are under threat and those rights are part of your remuneration package.

While the eyes of the world have been on the defined benefits within BSPS, you have been building up a personal pension with Legal and General which supplements your state pensions and any DB rights you have.

I wrote at the beginning of last year that both Tata and Greybull have under-promoted their workplace pensions and you can see why.

They did not want these workplace pensions connected in any way with BSPS transfers. They succeeded,  the Tata and Greybull workplace plans were treated as irrelevant then so that they  can now be sidelined. That’s what’s happening.

I have pointed out  on this blog that Aviva and Legal and General – their management and their IGCs stood to one side and did not promote their workplace pensions to Tata and British Steel staff (respectively). I have complained that these excellent plans, capable of taking transfers, were ignored by IFAs and by the FCA and tPR. Had these plans been promoted , rather than some of the SIPPs into which steelworker’s “wealth” were invested, many of the problems that are emerging today would have been avoided.

Where was the protection for staff interests from the employers? Why did the plan providers stand back and where were the Regulators? Who was protecting your BSPS pension then and who is protecting your workplace pension now?

You deserve protection and so do your pension contributions. If your defined benefits were at risk (and there is every chance that Tata Steel will come under pressure following the break up of Thyssen Krupp’s partnership) then the Pensions Regulator and the Work and Pensions Select Committee will swing into action.

But a pension is a pension and who is fighting for you and your workplace pension?

Government – British Steel worker’s workplace pensions matter too!

BSPS Missing


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

MPs call the conflicts of contingent charging

This is good news. The pressure on the FCA to ban contingent charging for pension advice must continue. Because it opens the door on wider issues which I will explore in this blog.

You can read Frank Field’s letter to the FCA’s CEO , Andrew Bailey here (someone should tell him the FCA has moved!). Field is urging the FCA to look at compromise solutions, I agree. There are people who need help on DB pensions who cannot afford that help and there may be ways to accomodate these special needs into a framework that stopped the use of contingent charging in the generality.

Why hasn’t the FCA acted so far?

It seems the FCA are running scared of investigating the links between firms that charge for pension transfers on a “no transfer no fee” basis and the provision of bad advice

I am genuinely surprised to read this.

The FCA has called the industry for evidence of the damage that contingent charging has or hasn’t done, but it has its own data from its own investigations. What is holding the FCA back?

Isn’t it time that the FCA took the issues surrounding contingent charging more seriously?

The issues are conflicts of interest between an advisor’s business model and its client’s needs.

Take the lid off the contingent charge powder keg and any spark will ignite not just pension transfers but the wider issues arising from vertical integration.

This is what I suspect holds the FCA back.

Financial planning as lead generation

There is a conflict of interest between the needs of wealth managers (wealth to manage) and the work of financial planners (protection against living too long, dying too soon or losing an income).

Since the big bucks are in wealth management, financial planners (including those offering financial well-being in the workplace) are becoming little more than lead generators for wealth managers.

If every solution to the financial planning involves using an allied wealth management solution, it is not hard to see how financial advice gets distorted.

This is at the root of the contingent charge problem.

It is not just that contingent charges take the friction out of  the charging and collection of fees for transfer advice. They also liberate the wealth stored in DB plans for the benefit of wealth managers.

It is hardly surprising that the contingent charging model was created and deployed by Tideway, a wealth manager.  For Tideway, DB transfers are the basis of the wealth management business. Much the same can be said of St James Place and Quilter. Take away contingent charging and the whole funds eco-system is starved of the oxygen of new business.

The Treasury angle

The wealth management lobby is a powerful one. It influences the Treasury, The Work and Pensions Committee, has the interests of the public’s financial futures at heart. The Treasury has to balance the books.

This is another conflict, but a more fundamental one.

The impact of pension transfers in the short term is to bring forward revenues for the Treasury at the expense of the long term financial futures of ordinary people who otherwise would have had a defined benefit pension scheme.

The wealth management industry, including advisers, platform managers, fund managers, asset managers and the host of those who charge to the funds, is what the UK financial services industry is.

It needs constant feeding and the best source of its nutrition is the trillions locked up in occupational pension schemes (especially the DB ones).

This could be why the FCA are dragging their feet

Thankfully we have a parliamentary democracy that isn’t going to let this lie.

Well done Nick Smith.

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The long term solution is collective

If we are to break this cycle of conflicted lead generation , we will have to take on the demands of wealth management and create an effective lobby for collective pension provision.

DB pension plans are an effective way of delivering a wage for life. They are unaffordable to some employers and so we need to look at other ways to deliver effective pension planning. CDC is one other way.

De-risking DB plans by promoting DB transfers – as happened in 2017 through the irresponsible behaviour not just of advisers, but of trustees, journalists and (through the absence of action) regulators – is not a good way to deliver pension outcomes.

The wealth advisory model has its place, but its place is not Port Talbot.

Nor is wealth management the answer for most of the £36bn that left occupational schemes in 2017.

The tap that was turned on was marked “contingent charging” and that tap is still open. Though transfers are less common today, it is not because of a change of sentiment among wealth managers, it is because the cost for their lead generators has risen due to PI premiums. Many Pension Transfer Specialists can no longer generate leads for their wealth managers because of the cost of Professional Indemnity Insurance.

This is a crazy way to regulate the flows of assets.

The FCA belatedly are looking into advisory practices and I would be very surprised if any of the 30 firms that they are investigating conducted transfers using upfront fees.

Sadly, for those who have paid for poor advice out of their funds, the findings of this review may prove too little too late. For those advisers who have not been caught up in the contagion of conflicts, there is little to feel good about. They will have to pay higher fees to fund compensation through FSCS and the reputation of their (good) work will be tarnished.

Contingent charging should be banned and the murky world where wealth managers use financial planners as lead generators should be investigated.

Above all we must promote the power of collective pension schemes to deliver good outcomes to ordinary people and stop pretending that liberating these pensions into wealth management solutions is the answer for ordinary people.

port talbot 4


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AgeWage is closing its investment round (but you’ve still got a week to invest)


We’ll be closing our investment round with Seedrs on Friday 24th May. As I write, that gives readers a week to invest. You invest by clicking the link above, if you want to invest more than £5,000, drop a line and I will send you a full prospectus (you can also download the prospectus together with other supporting documents from Seedrs).

We are of course over-funded to the tune of 157%, a tremendous vote of confidence from the 427 people who’ve invested via the platform and to the larger investors who’ve come to us directly.

I’d particularly like to thank John Roe, who has – in the latter stages of the campaign stepped up to be our lead investor. John, as a private individual is responsible for nearly one third of the money we have raised in this round. He manages my pension and many billions of investments for people like me who invest in Legal and General Multi-Asset funds.

Proving the concept

In an abstract way, we have already proved that people are prepared to invest in an idea which though not fulfilled – is now reckoned to be worth over £3.5m.

But I am under no illusion, turning a good idea into a minimum viable product that can influence people to take better pension decisions is a major undertaking in itself.

The first thing to do is to build around us founders, a group of talented diverse people who share our entrepreneurial zeal. Thanks to the success of the round, I have found several high calibre people who will be working at AgeWage.

We have moved from camping out on the sofas of the 7th floor of WeWorks in Moorgate to our own office.

office for agewage.jpg

We promise to spend the money we’ve raised carefully and we will not be awarding any founders bonuses for the success of the round, every penny is to be spent on delivering the proof of concept.

That POC is simple, to demonstrate we can produce accurate scores from bulk data and to prove that those scores positively engage people with their pensions.

There is much more beyond the MVP. We want to help people take action to bring pensions together , to invest more responsibly and ultimately to turn pots to wages in older age.

We will also be seeking every penny worth of grants available in the UK (and still from Europe). We would rather not lean on our shareholders for further development, though a further round of funding will follow later in the year as we build our digital support service through phone and web apps.

If you are an investor

We don’t take our investors for granted, whether you invested in pre-seed or in this round, you will not just be kept informed but invited to participate. Next week, as part of our POC we will be opening our doors to investors who want their pots analysed for value for money.

If you would like to share your pension details with us, then we will issue data access requests to your providers so we can compare your investment value (NAV) with what you would have got if you had contributed to the AgeWage index. We will give you scores.

We want our investors to be first in the queue of people we help.


Doing not talking

I look forward to the next few months as a time to do rather than talk. For years I have heard my friends and colleagues moan about the lack of support for people as they save and spend their pension pots.

Now you have given us the chance to do something about it and to do so on an industrial scale.

Thanks to our investors, big and small, AgeWage is in a position to work with Royal London and many other pension providers to improve engagement, decision making and ultimately the age wages of millions of people.

If you are not yet an investor, here again is the link- if you are and you want to top up, the link is still open to you.



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No meat in the pie! Investment pathways

Screenshot 2019-05-14 at 06.13.14.png

So what do we think?

Yesterday’s pension play pen lunch brought together a small but enthusiastic group of us to discuss whether the FCA’s planned in retirement investment pathways, would bridge the advice gap identified by FAMR and the Retirement Outcomes Review.

If that sounds pretty technical, then it wasn’t, having over ordered pies and fish and chips this was a chance for bellies to be filled and conviviality overflowed. Thank goodness there is still a place in the City where we can discuss serious issues in a relaxed and harmonious way! These lunches happen the first business Monday of the month, May was odd in that the lunch fell on the 13th. Lunches are advertised on social media and they always happen in the partners room at the back of the Counting House pub in Cornhill.

Pension playpen logo

No meat in this pie

John Quinlivan referred us to a paper delivered by Willis Towers Watson in November last year. You can download the paper from this link, but to give you a flavour, here is how it starts

Something is missing from the defined contribution (DC) system.

If DC is meant to be a retirement system, then it should provide income that supports participants throughout retirement. However, retirement systems do not come into existence fully formed; they begin with fairly simple design features and evolve over time.

In its earliest days, the DC system was a savings (or accumulation) system, primarily a supplement to the defined benefit system. Managing the payout phase was not a priority. Several decades on, the system has matured. The absence of this feature cannot be overlooked any longer.

And this is how the paper ends

the DC system of today has work to do.

The bit in the middle explores various options for “managing the payout phase” without landing on any one as a way forward. The working group that produced the paper was formed by Roger Urwin who I remember grappling with the problem of turning individual pots into what we used to call “scheme pensions”.

The paper comes to the same conclusion – that only through pooling can this be done. Oddly the paper does not discuss pooling longevity risk in the way collective DC does it. Instead it discusses three ways to help individuals take the complex decisions needed to turn a pension pot into a wage in retirement

In summary, demand for lifetime income solutions has been anaemic in the past. It could be strengthened through a more explicit focus on longevity tail insurance, through thoughtful choice architecture, and through the application of new technologies.

The meat in today’s pie is a little gristly for me. Long-tail insurance is only happening in annuities, choice architecture can be delivered by new technology but in a world where the employer no-longer wants to play a part, there is a missing link, WTW don’t do retail.

Is there need for a non-advised solution ?

WTW do have a product that they have built that could deliver much of what is missing in DC (and annuities could do the rest). I am not sure however whether LifeSight – WTW’s mastertrust, has a retail offering. If it has – it has kept it pretty quiet.

The fact is that most master trusts have been built around the needs of employers to stage auto-enrolment or to consolidate failing legacy DC plans on a B2B basis. WTW’s solution is no different, even if it has the capacity to offer disconnected individuals a way to get their money back.

The insurer’s have similarly isolated their workplace pension offerings and do not advertise the capacity of workplace pensions to spend your savings. The assumption is that if you have a pot worth spending, you’ll have a financial adviser guiding you into a SIPP drawdown program.

But most of the “claims” from workplace pensions are far too small for advisers to worry about, advisers will only get involved if the workplace pension can be subsumed into the adviser’s vertically integrated solution. For WTW’s Lifesight (sitting on an LGIM fund platform, read a wealth management solution sitting on Transact). Both solutions are placing advisers at the heart of the solution

If you are running successful businesses, the problems of those who don’t have access to Lifesight or the specialist skills of wealth managers, there remains a gap – an advice gap. There is a need for a non-advised solution which is what the FCA want to encourage with the yet to be fully revealed in retirement “investment pathways”.

The risk of Implied outcomes

I was left scratching my head as to why a non-advised solution to the retirement outcomes review isn’t emerging.

Short of Royal Mail’s CDC proposal, the thinking around choice architecture, technology and long-tail insurance is pretty much the same as what it was in Roger Urwin’s heyday 20 years ago.

The new fund platforms have given life to the wealth management industry and allowed consultants such as WTW to provide solutions for the workplace. But we have yet to see the emergence of a genuinely mass-market pot aggregator capable of giving us our money back in an orderly way.

I suspect that this is down to fear, fear of the implied outcome of offering people “pensions” and of people not quite getting what they thought they were going to get.

The implied outcome of a pension plan is – to most people- an income that lasts as long as you do.

Whatever solution the FCA finally end up with, it won’t be collective as a CDC is collective. It will have to rely on annuitisation and individuals pressing buttons well into their senior years,

If the outcomes of their pensions aren’t what they implied at outset, elderly people (and their families) are going to be disappointed and will point the finger of blame at someone.

This is the risk of an investment pathway that implies it is sorting out the pension problem. It is only addressing one aspect – the choice architecture. It is not dealing with the issues of people living longer and it certainly doesn’t address people’s natural assumption that their workplace pension provides a wage for life.

In a recent survey of its membership, NEST found that an alarmingly high proportion of its members believed that because NEST is the Government pension it would provide them with a Government or State Pension.

There was meat in the Pension PlayPen pies but there was no meat in the debate, because despite our talking for nearly 90 minutes we were still no nearer answering the question we had posed ourselves.

“Will investment pathways bridge the advice gap in retirement?”. I leave it to Anthony Morrow – who couldn’t get the meeting to sum up the mood of the meeting as we broke.


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How glorious to be English!

marlow 3


I am sitting aboard Lady Lucy in the millpond at Hurley awaiting today’s guests. The sun is shining and there is only the slightest of breeze. Coots are nest-building and swans glide past me hoping that I will feed them from the bread bin.

The sound of water comes from below me and from Radio 3 which is this week celebrating along British rivers


I am thinking about football and the events which will unfurl today. Will Manchester City succumb to nerves and fluff their lines? Will Wolves spoil the scouse party?

Despite all the brouhaha about Brexit, Britain is quite the place to be.

Marlow 2

If you’d like to spend a day on the river aboard Lady Lucy, you can book yourself and friends and family on any of the days on the dropdown,

It is absolutely free.

Just follow this link

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So what the f**k is pentech?


People often ask me what the f*ck is “Pentech”. Well they don’t really – I ask myself that and then imagine that everyone is asking the same question.

But as people continue to follow and maybe read my blog, I have to assume that what troubles me – troubles them- I mean you!

We have fin-tech – which covers a multitude of techs, including insure-tech, reg-tech and even prop-tech. But Pen-tech hasn’t really made it into the tech family (yet).

I have often wondered why we find the idea of a pension dashboard so odd. After all, we were close to having combined pension forecasts 15 years ago and the idea of populating a few fields with data from different sources is not that advanced. But the pensions dashboard remains a kind of technological nirvana, so near and yet so far.

As I’ve noted before, the worry people have with technology is that you can’t really fiddle it. If you ask your data a question, you get a straight answer – a “straight through” answer. Which rather reduces your capacity to explain why something unpleasant is about to happen, like a realisation that all in the pensions garden is not rosy.

Pentech is slow to be adopted in some quarters because it can expose to common view the venality of some pension practices but much much worse, it can give people ideas that many pension providers would rather they didn’t have. If for instance you can, with a keystroke summon up a number that tells you what you own, what you’re paying someone to manage what you own and how successful that management has been… are not far from soliciting a second keystroke -“delete” . We are nearly deleted if we give people the pension technology they require. Pentech is a dis-intermediator and intermediaries do not vote for existential risk.

Pentech not only dis-intermediates, it also exposes whoppers. For instance it can show you that the data held on you is rubbish, This is very likely to be the case, because a lot of data is not static, we move house, change names and of course change jobs. Pentech puts us back in touch with our data (the pension finder service) but what we discover is often corrupt, data may have been badly input or not input or it can (occasionally) go wrong. The find/replace button is a scary one.

Pentech is – to those who see the word risk as bad news- bad news. It creates risks, risks of people finding out what is really going on , finding out that their data is dodgy, risks that people may decide to delete you from the management of their money.

All of this is behind why pensions has been slow to adopt technology, while other areas of financial services have been steaming ahead and getting their “tech-titles”.

To a techy, pensions really aren’t any different.

The business of getting data, and representing it to people so it tells them meaningful things is the same whether you are working out  a loan, a life insurance policy or a wage for life. There are assumptions in all financial services that underpin projections into the future but other than those assumptions, the only variables are the data inputs, the rest is a matter of fact.

Where pentech is so difficult is not in the representation of the data, but in controlling the reaction to that data. Give someone a number representing the amount they paid you to have their pension managed last year and they could fire/delete you. Tell someone how much money they have and they might ask it back.

Pentech is a very simple but a dangerous thing because it takes pensions off their pedestal and simplifies them, to a point where they can become meaningful to people.

Pentech is the way we unlock the gates of engagement, but to allow people to walk straight through, we need to be brave – a lot braver than we are today.

We need to be brave

I want to restore confidence in pensions – that’s what Pension PlayPen does and it’s what AgeWage will do. I want to restore confidence by dis-intermediating and I want to be brave enough to allow the 90% of people who don’t take advice, to make their own minds up on what they want to do.

I want pentech to open the doors for people to do just that.

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First Actuarial’s client conference in tweets


The Royal Society of Arts Clubhouse

First Actuarial had its first client conference yesterday, if you weren’t there, it’s probably  because you aren’t a client. Make sure that doesn’t happen again next year!

Here’s what you got/missed

At the heart of what we are about is a quite different attitude to risk

Hilary Salt contribution on risk was the central contribution of the conference

The Regulator spoke through David Fairs,

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David Fairs

though the new funding regime has yet to be fully announced , we heard about their nuanced position. “Limited Dependency” is the new “Self Sufficiency” Not everyone in the room saw this as doing much to halt the decline in DB accrual. David had published his thoughts in a blog released earlier in the day.

Spookily, the Pensions Regulator also published its new funding framework soon after. I said it was an awesome day

Getting technical

Duncan Buchanan and Wendy Hancock talked us through GMP Equalisations by comparing Jeremy Corbyn and Theresa May’s entitlements.

Points were made plainly

There was a lighter side to this technical discussion

Thinking harder

The technical session was challenging, what followed after the break was inspirational.

We heard from UCU’s Sam Marsh on how ordinary members had taken back some control of their pension scheme with the help of independent actuaries.

As Sam was speaking, the USS published its new proposals for the 2018 USS valuation (spookier still)

Sam made it clear that it was Hilary Salt and Derek Benstead’s pioneering report on USS finances that empowered him to push back against scheme closure

And he made it clear that “de-risking” in the coinage of pensions is anything but


Dignity in retirement

Terry Pullinger was typically plain speaking , talking of the need to provide his members and the wider community of working people with the dignity of a proper wage in retirement.

Member power, channelled through unions and MNTs has made a huge difference to our pensions landscape and I was proud that First Actuarial have been at the heart of positive change.

Pension reform comes from right and left

Baroness Ros Altmann brought the conference to a close, talking of her role from Myners to today, in championing those deprived of proper pensions by pensions injustice.

She got some tough questions from the audience , some of who considered it was the unions not here who had created a proper Financial Assistance Scheme. Her retort was clinical “where were the unions when we took a Labour Government to court?”

By coincidence, delegates not at the party were able to watch the first screening of ITV’s documentary that very night

On a less serious note, she revealed that by happy coincidence she will be on holiday in Spain on June 1st. The audience was asked

“has anyone got a spare for the Baronness?”

Celebrating a proper pension consultancy

It’s been fifteen years since nine actuaries set up First Actuarial. It is now in the top ten pension consultancies in the country.

First Actuarial came of age yesterday and the mood of celebration was maintained deep into the night as clients and consultants partied in the RSA Clubhouse basement.

It was a great day, made better by the RSA and best by the massive audience of trustees , and employers who celebrated with us!

Thanks to the people who made this happen- especially Mark Riches, Kate Vickerstaff, Tim Jones and Lisa Orange. Thanks to Mobius, Locktons, Aviva and PIRC for livening up our coffee breaks- most of all thanks to our guests who were FABI !

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Mark Riches

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Buy and Suppress the pensions dashboard

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Asmund Paulsen

I designed, launched and sold the first – and still only – Norwegian pension dashboard some 15 yrs ago.  “” is the pension dashboard service that the Norwegian pension providers, after we gained traction with it, insisted that they should own. It is (therefore) now still – some 10 years later – no more than our initial “minimum viable product”. We avoided “buy & kill”, but got “buy & surpress” …

These are the words of Norwegian pensions champion Asmund Paulsen.

I hope they will not prove prophetic for the UK pension dashboards but I fear that we are already seeing the degeneracy of the Norwegian model.


Today I will talk to a group of insurers about the pensions dashboard. It will not be an easy session as I don’t intend to pull any punches.

We are now 6 months on from the latest relaunch of the pensions dashboard and – other than a tame response to a tame consultation – nothing much has happened. This despite the protestations of the chief protagonists, the ABI, the DWP, MAPS and Origo that we would see a dashboard this year. The chances of that are fading as fast as Brexit and what we get is likely to be as unsatisfactory.

Nothing will happen without bravery

If I could characterise the one quality that the pensions dashboard project is missing – it is bravery.

Here I mean the bravery to speak out against the conventional wisdom of “buy and suppress”.

Those outside the tent, and I think back to previous iterations of the project, have been consulted and mollified, but they have been excluded. When they have questioned what is going on within the tent they have been pushed away.

The pensions dashboard is like a royal court , the courtiers bow and scrape to the Pensions Minister while carving up the kingdom between themselves.

There are only two strategies that the established pension providers are pursuing.

The first is to maintain the status quo and see as little disruption to their legacy books as possible. This enables them to maintain their embedded value, on which their share  solvency depends.

The second is to increase new business flows through pensions “project fear”. Project fear in this context means telling people that without radically increasing the contributions they commit to pensions, they will be bereft in retirement. The purpose of pensions project fear is to increase the value of the pension providers to the market, principally (but not exclusively) to shareholders.

It is the solvency of insurers (and now master trusts) that is at stake and it is the boost to future profitability of these same institutions that excites them. The dashboard could be the key to making workplace pensions profitable – a whole lot sooner.

There is no one who is prepared to call this, the court is a powerful persuader to silence.

Hiding behind poor data

We are moving towards transparency in financial services, that is what open banking gives us.

But the pensions dashboard will not be adopting the principles of open banking , laid out by the CMA. Instead it will be run – like the Norwegian dashboard – by those who own the data as a closed shop. We will not be getting open pensions any time soon.

The reason, we are told, that we cannot have open pensions , where dashboards can use the technical architecture of APIs and authentication, each to their own, is practicality.

Those who wish for a centralised system of management argue that having multiple dashboards finding their own data , will increase costs, increase risk and open the doors to scammers.  They also argue that it would expose those organisations who own dirty data , for what they are – poor record keepers,

Transparency being the best disinfectant, I would argue that the best way to clean up a problem is to shed light on it, not to keep it hid.

But this is not the view of the court, who argue that we should wait until the data is clean, before it is mandated that we can see it on a dashboard.

The minimum viable product

This phrase is much used by start-ups to mean the least they can build to prove their concept. We have already had a couple of rounds proving the concept of dashboards and they have taken us three years to complete.

It would seem that we are now to have another minimum viable product, produced within the Money and Pension Service which is called “the pensions dashboard”. The Government expects other dashboards to be built as satellites to their minimum viable product.

But nothing will compete with the minimum viable product which will be controlled by a steering group appointed by Government and a Governance Committee appointed by Government and anyone outside those groups will be outside the tent.

The Government Dashboard alongside the quangos that are growing up as part of the pensions court will so atrophy innovation that the pensions dashboard will join Pensions Wise and very like the Money and Pensions Service, as white elephants.

Meanwhile life goes on

I will be happy to be proved wrong. I would very much like a dashboard to restore confidence in pensions. But I see no sign of it being used to do the things people want to do

  1. Work out the value of their pension pots for the money they’ve saved
  2. Find a way to bring pots together to make them easy to spend
  3. Find ways to ensure their money lasts as long as they do
  4. Establish whether their money is being managed in a responsible way

The ABI and PLSA are so fearful of giving people the information they need that last year they blocked an initiative to show people what – in pounds, shilling and pence – they were paying for their pension pot. The monetary figure was excluded from the single pension statement produced by Ruston Smith and Quietroom and it remains excluded.

Insurers, when given the choice will not disclose to their disadvantage and – when unsure of the consequences – will refuse to take the risk

That is why there is a very real risk that the dashboard will remain on the drawing board for a good time yet and when launched – move little beyond the minimum viable product.

A braver way?

I believe there is a better way to run pensions, a way that allows people to see what they are buying into by looking at what they’ve bought. I don’t think finding pensions is that hard and that modern technology should allow people to ask questions of their various pension providers and get answers in real time.

This “better way” is already emerging in other areas of life- indeed in other areas of financial services.

Pensions would like to think of itself as a special case, but it isn’t. It is part of the retirement eco-system that includes houses, inheritances, business interests and other forms of savings. People are looking to take back control of their retirement finances and are getting lifestyle answers delivered to them through digital technology.

But they are not getting this with pensions.

The pension dashboard continues to be an embarrassment and until someone is brave enough not to be “silent in court” we will go on praising it as a great initiative while suppressing innovation.

Asmund Paulsen is  likely to be proved prophetic, unless we face some uncomfortable truths and start behaving with a little more bravery.

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Why we must guard against ESG profiteering.


There is a great wave of enthusiasm amongst the investment community for responsible investments, the three factors underpinning it, Environmental, Social and Governance came into almost every discussion at this week ‘s Public and Private Pensions Summit.

But with such waves of enthusiasm, there must be eddies of caution. ESG is essential if we are to encourage good behaviour in the organisations into which we invest, but we must not allow the keys to ESG to be handed to an elite group of specialists who can hold us to ransom to unlock its secrets. Nor can we allow fake green to paint over the real thing.


The price of ESG

I am not suggesting that this is happening, but the chances are that profiteering from ESG will happen and that as I write the more unscrupulous fund managers are dreaming up ways to compensate for margin erosion by the “beta brigade” by fixing the price of ESG at the wrong level.

If you don’t believe that ESG has a price, look at the pricing differential between LGIM’s Futureworld Mutli Assset Fund and the LGIM Multi Asset Fund. The latter is considerably cheaper and this is explained by it not having the tilts and screens of the former. The difference in price is the current price of ESG. I am prepared to pay that price for now, I invest in the FutureWorld versions of L&G’s funds because

  1. I believe that they will bring me better performance
  2. I see them carrying less risk
  3. I like the idea of my money being invested responsibly.

But the price I am paying for Future World is twice what I could be paying for the global equity equivalent. I am hoping that the price differential will fall over time as the upfront R and D costs in setting up the fund are diluted and the ongoing management charge converges with those of non ESG funds. Indeed I’d like to think that in five years time that the idea of a non-ESG fund won’t exist. After all – who wants to invest irresponsibly.

The impact of the price differential

One impact of differential pricing is that it makes it very hard for workplace pension providers to make the ESG fund the default.

Put simply, no matter how much the IGC reports clamour for green defaults, so long as a price differential remains, those running the fund platforms which drive long-term profit for workplace pensions will go for the cheapest version.

They have only three choices

  1. Stick with the cheap and not so cheerful default
  2. Upgrade to the ESG version and absorb the margin hit
  3. Upgrade to the ESG version and pass on the extra cost as a price hike.

Of the three options (1) is the obvious winner for now. It is not until the clamour for ESG defaults becomes deafening that (2) and (3) come into play. Exactly the same issues occur for trustees as for IGCs, no matter how they might want ESG in the default, until there is a compelling business case for it, it ain’t going to happen.

What we can do

Personally I have little sympathy for fund managers who complain about margin erosion. I work in a WeWork that looks into Schroders and I see the corporate gym, the workers canteen and the pleasant balconies on which fund managers can soak up the sun. It does not look like that fund manager is suffering a lot of margin pressure to me.

I suspect that a lot of the costs of ESG can be absorbed out of the fat margins identified in the FCA’s Asset Management review and the CMA’s subsequent market study. After all, most people would assume that when they gave their money to someone to invest, they would get a degree of stewardship that as the bare minimum , would be called “responsible”.

It’s a bit like buying a car and discovering that the brakes are extras. ESG is not the equivalent of leather seats (though you’d expect leather seats for the price we pay for most active management).

What we can do is complain, complain to IGCs , to Trustees , to the FCA and tPR and write to Government (the DWP and Treasury) and ask why ESG is not standard.

We don’t have to pay more for something we should have always have been getting and if we are getting more than we expected, then we should politely ask fund managers whether they might take a little less.

ESG profiteering

The more fund managers I hear explaining how much they are now doing to keep our funds responsibly invested, the more I question what they have been doing the rest of my days. I don’t think that the concepts of climate change, sustainability and good governance began in Paris in 2015. I seem to remember that most of the ideas behind ESG were being discussed when I was at primary school in the early 1970s. Wasn’t the world about to run out of fuel by now?

What is happening today is that there is a crisis created by our complacency over the intervening years and that is leading to everyone wanting to do ESG now. And so , instead of getting on with it and fixing things which were broke, we see fund managers passing on the bill to the customers.

I am not sure that we should be picking up this bill. I think it is the bill for repairing a research system that should have been in place 20 years ago.

So instead of ramping up prices so we can have our funds invested responsibly, perhaps we should be asking for a fund management rebate for not having our funds invested responsibly over the past forty years.

A little radical? Well maybe- but let’s not accept price hikes as a gimme. ESG profiteering is going to be a big theme of the value for money debate and this is the first salvo on my blog of a theme you will hear a lot more of!

profiteering 2



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Our pensions need you!

DWP line


I got some fierce feedback on yesterday’s blog where I moaned at the lack of progress in helping people convert DC pension pots to a wage for life/salary in retirement/agewage.

Here’s Richard Chilton

There is an implicit assumption in much of this that DC pension funds are the main source of money in retirement. For very many people, they aren’t. They are often just the icing on the cake. There are DB pensions, the state pension, income from property and inherited money or money from downsizing a home. It is difficult to understand the significance of taking some DC money without understanding the overall financial situation.

Richard continues

People taking pension money are also not always retiring. They can be taking it to invest in a way not available within a pension fund.

I sat as a judge yesterday morning for the Money Marketing “best retirement adviser” award and had a number of excellent conversations with top IFAs. Retirement Planning is – for those lucky enough to have such advisers, the art of financial well-being.

In their recent book “A salary in retirement”, Richard Dyson and Evans estimated the value of the state pension to be over £280,000. This beats by a factor of 9 , the value of the average DC pot. If your state pension is worth 9 times your DC pension , then Richard Chilton and Brian G are right, all that workplace DC pensions are – are icing on the cake.

Your workplace pension isn’t the half of it!

But statistics are bald and don’t take us half way there. I had 10 pension pots (mostly workplace derived) and apart from the one with a GAR, they are all now in one pot, managed by LGIM through a Legal and General workplace pension.

There are many like me, what sociologists like to call mass affluent, people who do not become clients of high quality IFAs and need self-help books like Dyson and Evans’. AgeWage will be built around their needs.

But if all financial services aspires to – is to help the “haves”, then it will be failing in any kind of social purpose. If we are serious about democratising the savings culture through auto-enrolment, we must have an expectation that the average working person will – as they have in Australia – come to regard their retirement savings as a key personal asset. As much an asset to be cherished as their house and the inheritance.

This sense of ownership is sadly lacking and it’s what the AgeWage score is trying to do. The score aims to make the money we have saved tangible to the savers. In time, we can hope that workplace pensions will become as important to people’s later life finances as the state pension (and not from dumbing down the state pension). We have to plan on success .

Proper help for the mass of us

Richard Chilton is one of the good buys, he’s a pension expert who gives of his time to help people understand their  pension freedoms. There are many like him helping people through Citizens Advice Bureaux and the Money and Pension Service (MAPS). Pension Wise relies on people like Richard.

I hope that they can find ways to be more effective over time as I see much of their experience could be better deployed if they were released from the shackles of guidance and allowed to help people make better decisions as advisers.

The Citizen’s Advice Bureau, the Money Advice Service and The Pensions Advice Service must now be re-risked and de-risked into the guidance model.

MAPS says it is in “listening ” mode , the FCA are consulting on whether to extend their consultation on the impact of FAMR and the Retirement Outcomes Review. Everywhere Government is deliberating on how to help people who have very real financial problems in retirement and only a handful of IFAs and guides (like Richard Chilton) to talk with.

The silent majority (a phrase made famous by Bernard Levin) do not shout the odds over the lack of support they are getting on retirement planning. They don’t because they are silent.

But that doesn’t make their plight any less real. Each year that ticks by without Government biting the bullet and investing in new product (CDC) and new advisory support (the potential for MAPS) , the worse the impact of pension freedoms will become.

The private sector will fill this gap

The entrepreneur in me has seen this opportunity and is determined to meet it. I nearly said “exploit” it, but that is the wrong word.

I believe that the small pots that Brian and Richard talk of, are getting bigger and more numerous. I see people taking more interest in their pension saving and I see a growing need for mass market advice which I hope (in part) to meet.

AgeWage is the platform on which I hope to build this service. Three months ago it was a pipe dream, now it is a business with a £3.5m valuation validated by over 400 investors with getting on for £450,000 in inward investment.

We are already receiving help from insurers and trustees so that are scores can be in production by the autumn, plans to help consumers directly are well advanced. If you would like to join us, you can do , by investing as little as £11.50 (net) for a share in AgeWage.

Press this link to do so and help me put your money where my mouth is.


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

What’s normal?

workplace pension dispersion

normal’s that line in the middle

When we allow money to be taken out of our salaries , we don’t really know what to expect.

That’s why the FCA want the independent governance committees that oversee workplace pension providers, to tell us what value for money is and whether we got it. The DWP are doing the same thing for workplace pensions run by trustees.

The idea is that we will be able to log onto a website and see if we’re getting what we should from our investments – and the administration and communication of our pensions savings plan. In future we may  be able to see whether we are likely to get value for money from our pensions spending plan – better known as “drawdown”.

So far we haven’t done too well and that’s because analysis of “value for money” has focussed on abstract ideas like investment performance, service level agreements and “member engagement”. All of these things are measurable but they don’t mean much to ordinary people who secretly want to know how they did and whether they got value for their money. Some of the things that IGCs focus on like “engagement” depend on whether their’s anything to engage with.

I can define value for money simply.

I have been thinking about little else than this question. Here is the answer I have come up with. See if you think it holds water.

I start at looking at all the contributions that you’ve made into your pension over the years and compare it with what you’ve got in your pot (known as the net asset value or NAV). I can tell you the interest you’ve got on your money – this is known as the internal rate of return (IRR)

Then I can look at the interest you would have got if you’d invested the same money at the same time, into an average fund.

If you have got more than you’d have got from the average fund, you’ve got value for your money and if you’ve got less, than you have not got value for money.

It really is as simple as that. The AgeWage score I talk about simply tells you how much you’ve beaten or lost to the normal score. The normal score is 50 and you can get up to 100 or as little as 1.

I’m pleased to say that this idea has proved very popular on our crowdfunding platform and we are now going to go into production, starting with a period of testing our normal fund to make sure it really is normal

Screenshot 2019-04-24 at 06.43.22

So what is normal?

Surprisingly, there is very little academic research into how your money has been invested since pension savings plans (DC pensions) started. We are taking the start point of pension savings plans as 1980, that’s because most of the people who started saving before then will now be spending their savings!

Our normal fund has a price at which your money is invested for every day of the last forty years. The price is decided by looking at how a basket of actual funds grew or fell day by day. As time went by, most of our money became invested “passively”. Our normal fund is increasingly priced by looking at how the indices rather than the basket of funds have done.

If we get the price of our normal fund approximately right, we will be call it normal.

How we test whether the prices of our normal fund are right is by using “big data”. What we mean by that is that we are taking tens of thousands of our contribution histories and seeing whether the outcomes (the NAVs) beat the outcomes from the normal fund.

When we get it right , we’ll be able to see the same number of your AgeWage scores beating normal as losing to normal. We’ll even be able to see whether the losses and gains are of equal measure.

When we can show that 50,000 contribution histories cluster around the normal score symmetrically, we’ll have cracked value for money. We will know what normal looks like and be able to tell you whether you’ve done better or worse than normal.


workplace pension dispersion

normal’s that line in the middle

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

Port Talbot steelworks – our Notre Dame

port talbot 4

I was woken this morning by radio news of an explosion in the Port Talbot works. My heart sank as my mind turned to people I have met and the livelihoods that depend on these works

It seems that the incident was caused by a train , that there have been no fatalities and only a couple of minor injuries have been reported.

The safety procedures seem to have worked – a testament to how far workers protection has improved in recent years.  18 years ago a blast at the Corus plant killed three workers.

The cost to productivity and the fragile recovery of the steelworks towards sustainability will emerge over time.


 The works , the town and pensions

The Port Talbot steelworks are iconic. The link between the town and its major employer is obvious even as you drive past on the M4.

The blast is felt in India (at least on social media)

The link between the works, the town and pensions is well known. It was here that some of the most egregious advice was given to financially vulnerable steel men and the words “Port Talbot” have resonance in pensions circles.

Wales’ Notre Dame?

 Port Talbot means so much to us.

Port Talbot is relevant to the UK, to India and it has brought the issues that this country faces over pensions into a sharp focus.

We understand that the financial futures of many steel men are linked to the productivity of the works. We want the works to do well because we want the steel men to get good pensions. The town, its people and its future prosperity are so tied up with the works that Port Talbot is to me and to many others a way of understanding what workplace pensions can be about.

Which is why today’s blast seems relevant to me as a pensions person.

And what is of enormous value is that the NewBSPS scheme is pretty well sufficient from problems such as these and that past benefits, whether they are paid from the PPF or from NewBSPS are secure.

We hope that the blasts heard and felt by the people of Port Talbot and nearby towns will not lead to lay-offs and that the works will return to full production soon.

A nation holds its breath, and those who have been involved in the steel men’s “Time to Choose” hold our breath too.

Port Talbot has made pensions relevant for us, we are deeply engaged with the livelihoods of its people and hope that this blast will not endanger the covenant of work and pension accrual, the plant provides.

Port talbot sun 2

Sun rising at port Talbot

Posted in pensions | 1 Comment

The Bitcoin scam – that’s on your feeds today.

Screenshot 2019-04-23 at 06.42.11.png


Take a look at this link,

It purports to be the Mirror telling people they can make £1,000 a day trading bitcoin on an automated platform. All you have to do is feed in £190 and away you go. The algorithm buys and sells bitcoins and you put your feet up watching your account balance multiply.

The link appeared on my twitter feed this morning and it’s probably on your too.

Screenshot 2019-04-23 at 06.43.21.png

sounds too good to be true- is too good to be true.

On a trading platform, every buyer must be matched by a seller. If not then we have a bubble. Back in the 18th century, people bought into the South Sea Trading Company in the belief that its shares could only go up, people bought into black tulips, the Equitable Life and CDIs for the same reason.

So what in heaven’s name is a famous newspaper – the Daily Mirror doing running what appears to be advertorial.

Well because this is a scam. The website that looks like a Mirror website is not, every single link on that site leads you to a scam run by Crypto Cash Fortune.

Which means that ITV’s Good morning Britain becomes complicit in the scam too.

Press the link on this screenshot of the ITV program at the top of the article and you get through to this website

Does Rose Hill, the Mirror reporter supposedly endorsing this product, know her article  has been hijacked like this? I’ve written to ask her.

Do Susannah Reid and  Piers Morgan of the ITV’s Good Morning Britain know what losing even £190 can mean to a family on the breadline? And it won’t stop at £190- we all know that people pile in more and that’s when they lose their fortunes.

Which is why Piers and Susanna are endangering ordinary people’s finances – with such gormless incredulity.

Screenshot 2019-04-23 at 06.30.13.png

Does anyone really believe that an automated trading platform investing in CFDs is going to be a sensible investment for ordinary people?

Does anyone think that Steve Jobs, Richard Branson et al are talking about Crypto Cash Fortune?

Of course not, these endorsements of Crypto Cash Fortune are as fake as everything else on this fake website

Look everyone, this is an American organisation with no FCA authorisation using ITV and the Daily Mirror to sell an extremely risky investment as a get rich quick scheme.

How can this possibly be right?

How can this article be on our social media feeds? How many unsuspecting readers will take Rose, Piers, Susannah’s, Richard’s Warren’s and Steve Job’s word for it?

Crypto Cash Fortune are using all kinds of spoof websites to run what they call advertorial. I’m calling the Mirror and ITV because their commercial interests are at risk from this.

A scam is a scam is a scam; these guys will be stopped by the Regulators eventually but for now it’s up to us to make sure people are protected.



The Disclaimer on the website says

Earnings and income representations made by Crypto Crash Fortune, REAL_HOST (collectively “This Website” only used as aspirational examples of your earnings potential.

The success of those in the testimonials and other examples are exceptional results and therefore are not intended as a guarantee that you or others will achieve the same results. Individual results will vary and are entirely dependent on your use of Crypto Crash Fortune.

This Website is not responsible for your actions. You bear sole responsibility for your actions and decisions when using products and services and therefore you should always exercise caution and due diligence. You agree that this Website is not liable to you in any way for the results of using our products and services. See our Terms & Conditions for our full disclaimer of liability and other restrictions.

This Website may receive compensation for products and services they recommend to you. If you do not want This Website to be compensated for a recommendation, then we advise that you search online for a similar product through a non-affiliate link.

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

Contingent charging – a conflict too far

Screenshot 2019-04-22 at 06.57.40


BSPS was always going to cause collateral damage. The aftershocks of the £3bn that left the scheme during “Time to Choose” are now being felt by financial advisers as the testimonies in this article show.

The advisers are talking of their struggle to get professional indemnity insurance to continue offering advice on whether to take a cash equivalent transfer value from a DB Scheme.

One adviser, commenting on Darren Cooke’s testimony writes.

This is the biggest threat to small firms since I’ve been in this business. I think lots of companies will be for sale this year which will drive business sale prices down. Some might just have to close the firm down and see if they get another firm to take on their clients. The Regulator should have seen this coming, it was an easy way for unscrupulous firms to make a quick buck and clear to see.

The comment is insightful on a number of levels. Firstly it shows how vulnerable IFA businesses are to reputational issues such as the PR from Port Talbot. Then it shows how dependent many IFAs have become on the revenue streams from transfer business and finally it demonstrates how reliant IFAs are on the FCA to maintain standards among them.

Underpinning the comment is the dilemma at the heart any business model, to what extent do you compromise on long-term value to receive short term profit. This conflict can be expressed in many ways but let’s focus on the matter in hand, that around half of the transfers that happened over the last three years , were not satisfactorily advised on – according to the FCA.

In the short term, grabbing assets into a vertically integrated advisory model at £400k a pop is a win- win -win. The adviser gets a fee  for implementation which is paid for from a tax-exempt fund without VAT and with zero impact on the client’s bank balance.

The adviser gets ongoing advisory revenues on the money and possible a split of the management fees if the firm are involved in managing the funds. These fees too are from a tax exempt fund and not liable to VAT. They are not – under contingent charging , met from the client’s bank account, they are a charge on retirement income.

It is quite possible to earn 2% upfront (£8,000) and 2% pa on the £400,000 – the average CETV from BSPS. These fees are payable to retirement and – should the client choose to drawdown on an advisory contract using the IFA’s fund management service, they become part of the advisory firm’s embedded value.

What is happening is that the retirement funds of clients are funding the retirement of advisers.

This is the conflict that many IFAs face and it is only now, as FOS limits ramp up and PI shoots through the roof that the impact of those conflicts is being felt.

When will IFAs admit defeat?

It is all very well blaming the FCA for not seeing this coming. But the conflicts created by contingent charging on transfers were clear to see from day one.

Even now IFAs cannot admit defeat, that is because so much of the embedded value of their businesses is dependent on the recurring income on money transferred from DB plans and the positive cashflows of easy transfer fees, still sitting on the P/L.

Many IFAs are now caught on the horns of a dilemma, they have built businesses which are now so expensive to insure that the embedded value is falling and so are cashflows.

But admitting that contingent charging was wrong in the first place is a much wider issue. Many of the insurers and SIPP providers who provide the wrappers and platforms to which DB wealth has now transferred, are also in danger.


When will contingent charging be banned?

This is such a sensitive issue, that most providers won’t even talk about it. The IGC reports published this month make no mention of transfers. There are shareholders who should be asking questions about how much of the recent revenue successes of quoted firms such as Quilter, SJP, Prudential, Royal London and Aviva are DB transfer related.

Some insurers – such as Aviva have openly stated that contingent charging should be banned.  

But the general public comment from advisers and product providers is that contingent chugging should stay.   Steve Webb has out strongly against banning contingent charges. The matter has been discussed by Paul Lewis. The matter has been debated in parliament.

I suspect that the only thing that will stop the talking and get a ban in place would be a change of Government. There is too much of this Government in the wealth management industry (Rees-Mogg down) for the FCA to ban contingent charging. The FCA is conflicted too.

So contingent charging will continue to be justified as the way to bridge the advice gap where the cash-poor can become cash rich by spending vast sums dismantling their pensions- largely for the benefit of those who advise them.

The FCA will continue to consult.

I will continue to bang on about this and those reading this blog will continue to feel uncomfortable that I do.

Contingent charging is the root of all transfer evil. If the IFAs really want the FCA to lead, they should admit defeat, but they won’t – they’ll hang on in hope that somehow things will get better.

They won’t.


Posted in advice gap, BSPS, pensions | 2 Comments

St James Place GAA Chair Statement- a must read

There aren’t many employers or policyholders that SJP run workplace pensions for, but though they are few, they merit a mini-IGC – known as a Governance Advisory Arrangement (GAA).



The SJP GAA Chair Statement is an excellent document that looks at value for money within policies used by SJP customers as workplace pensions.

It is a must read because it brings an institutional perspective to a retail issue – that of vertical integrated advice and product management.

This is the second time I have read this report and for a second time, I am highly impressed.




Given that ‘value for money’ inevitably assesses all the benefits received in the context of the charges levied, the GAA’s opinion is that the value for money varies from good to poor. When considering the earlier series of plans, policyholders with large funds and Series 3 policy holders which are more than 10 years into their contracts may receive good value for money. Policyholders with smaller funds and other Series 3 policyholders with less than 10 years in their contracts receive lower value for money. Smaller funds represent a large portion of the early series of plans. Series 4 policyholders pay different and simpler charges with, overall, a similar level of value for money. Series 4 policyholders represent the majority of policyholders

Policy charges are easily assessable, but the investment strategies pursued by SJP advisers are varied – tailored to the needs of each customer. The only exception is the SJP staff scheme which is invested in SJP funds and administered by SJP/

So the GAA are right to point out that without better reporting it cannot do its job.

However, the GAA was not able to conclude that St. James’s Place reviewed the outcomes for policyholders individually or in aggregate in a way which fed back into the oversight of the model portfolios. This was particularly pertinent for the SJP staff scheme where there is no advice.

The Chair’s Statement carefully picks its way through these difficulties. The tone of the report is formal – the report is there to be read by professionals , this is not a populist report. It’s tone is perfect and gets a green.

Value for Money Assessment

Although SJP are not as other providers , the GAA looks to assess value for money and concludes that while some policyholders are getting value for money, some most definitely are not.

It is not very easy to see who is winning and who is losing, not least because SJP don’t seem particularly interested in opining on what good looks like.

When the IGC inquires about the transaction costs within the workplace pension investment strategies – they come up with some startling results.

As the majority of SJP funds employ active management these costs are higher than other providers generally. The highest disclosed at June 2018 being Alternative Assets at 1.08%. High costs like this can erode members fund values over time, although the GAA note that the picture is mixed with the lowest transaction cost disclosed being minus 0.38% for the Absolute Return fund.

Since the dispersion of results is twice the workplace pension charges cap, you’d have thought this would have solicited some urgent comments from SJP. This does not turn out to be the case.

SJP have not commented on whether the transaction costs are in line with expectations; this is something we will look at further next year.

The “money aspect of the VFM assessment looks extremely toppy. If transaction charges of more than 1% are added in, then they begin to look excessive. The negative slippage on the Absolute Return Fund is worth of some kind of statement, if only of congratulation!  I wonder how on top of these costs , SJP advisers are.

Although I think the VFM assessment methodology fine, I am disappointed not to see more analysis of outcomes.  The best way for this to be done is to analyse the Internal Rate of Return of individual policies and benchmark them against each other. That would at least get to the bottom of what is working and what isn’t.

I’m giving the GAA an amber for its VFM assessment. What is there is good, but there is too little here for the VFM assessment to be meaningful.



SJP is a quoted company with over £100bn under management. It is genuinely surprising that it does not want to adopt a full scale IGC (something I’ve said in previous years).

As far as I know, the GAA is the only governance mechanism that can ask the difficult questions about charges, costs and value – from inside the tent. Certainly it is the only one to publish its findings.

The next steps section of the report makes it clear that the GAA are not going about their work  quietly


In the next year the GAA will:


  • Further assess the extent to which St. James’s Place governance monitors policyholders’ portfolios effectively.
  • Review the process by which SJP Partners tailor the investments for each policyholder.
  • Further consider policyholder feedback methodology.
  • Assess the future consideration of charging structure.
  • Assess the extent of Environmental, Social and Governance investment considerations.
  • Assess the extent of any actions taken around transaction cost analysis.
  • Assess the investment review process for any exceptions.

For a mini IGC, the SJP IGC is not pulling its punches, I give it a green for that, it is doing  an effective, if under publicised job


In conclusion – this is a must read


I am really pleased that the GAA have again written an authoritative statement of what SJP are up to as a workplace pension provider.

In doing so , they provide valuable insights into the vertically integrated structures that SJP employs.

This is a must read for people who want to understand how over £100bn of the nation’s wealth is managed. Like it or not, SJP sets the pace and the benchmark for other such firms.

This statement is of great value.



Posted in pensions | Leave a comment

Are IGCs and Trustees worth it?





The best test of the value of an IGC or an occupational trust board is to imagine how things would work without one. Before 2015, insurers ran workplace pensions for multiple employers using the bald trust of a GPP operational interfaces that were what the employer saw. For bigger employers, insurers bespoke communications and can offer an employer specific default fund but no one acted purely for the member. The IGC was supposed to change that.

The occupational pension scheme now comes in two guises – single employer and multi-employer. Unlike a GPP, an occupational pension can provide defined benefits and will be able to provide semi-defined benefits under CDC.  The trustees do the same job whether they oversee a single or multi-employer scheme though the level of scrutiny they are under from regulators varies according to the level of guarantees in the benefit and whether the trust is set up by a single employer , or more commercially for multiple employers.

It’s my view that IGCs and Trustees are as effective as they have to be. If no-one takes any notice of them, they lapse into irrelevance – which is frankly what’s happened to most occupational DC trusts, some master trusts and even one or two IGCs.

I believe that without these fiduciaries, the workplace pensions we invest our money into , would be run for the benefit of anyone but members. Left to their own devices, consultants, platform providers and fund managers would so erode the value of our money that the money we have to purchase a pension at retirement – would be severely reduced.

Proof of this  is what happened before modern governance and regulatory supervision arrived.

The work I have done in 2019

Over the past three weeks, I have read, re-read and reported on the IGC reports produced by the providers of workplace pensions in the UK. These reports do not cover all the pensions we invest in, there is a substantial group of providers who do not have IGCs, it includes SJP (which has a mini- IGC) and many SIPPs that do not operate in the workplace. These products are supposedly “advised”, though the FCA is concerned that many of them have many participants who have lost or sacked their advisers and have very little protection from malfeasance.

I have read these reports with an eye to three things

  1. Engagement – is the report readable and is its tone engaging
  2. Value for Money – “is the report properly assessing the value you are getting for your money?”
  3. Effectiveness – does the report show the IGC robustly pressing for better for policyholders.

I have scored each factor red , green or amber and tried to remain consistent with the work I’ve done in previous years and can present my findings for the fourth time in the table below. I am happy to share the table with anyone who wants the spreadsheet – which includes URLs for every report still on the web. – (no firewall).

IGCs 2019 bright +.PNG


2019 trends

Transaction costs – a mixed picture

2019 was supposed to be the year when we saw how much we really paid for fund management- not just the fees to the managers, but the cost of the management itself.

In some reports we did. L&G showed that you can get cost data from external managers (though their report did give us the kitchen sink). Others managed to give us edited highlights which worked rather better. Fidelity showed a before and after table – which demonstrated how the Fidelity default reduced in cost after discovering last year that members were paying more in transaction costs than to the fund manager. Some reports gave up on getting these costs – which was disappointing. The most bizarre reports were those who discovered high transition charges but wouldn’t tell policyholders which funds had them!

ESG – a start but only a startESG

The reports all had something to say on ESG, but we have yet to see the fruits of this engagement. While some IGCs (L&G and Aviva in particular) have focussed on ESG in prior years, this year every report ticked the box  – and many only ticked the box.

I look forward to a time when we don’t have to talk of responsible investing as an alternative form of fund management but look at ESG as an integral part of the value managers bring. Only when ESG is part of the VFM assessment – will it be fully integrated.

Too many of the reports still talk of the risks of adopting ESG, not enough of the risk of ignoring it.

The wider context

The terms of reference for IGCs were set out in 2015, since then we have seen huge changes in the pension landscape.

One example is the extent to which DB rights have been exchanged for DC rights through CETVs. Very little of the billions transferred found its way into workplace pension. Part of the reason for this was that financial advisers prefer to use vertically integrated self invested personal pensions. Part of the reason has been a reluctance from employers and providers to promote the workplace pension over more expensive alternatives.

I am disappointed that IGCs have not extended their terms of reference to consider how these plans could be promoted to people transferring. This goes as much for master trusts as workplace GPPs.  There is a job to be done to compare the available workplace pension with the promoted advised solution and perhaps this is something the FCA will look into. It would be better if the IGCs (and occupational trustees) , got on the front foot.

Port talbot

Reactive or proactive?

The best IGCs are proactive, looking for new and better ways to assess value for money and improve outcomes. They look at best practice in communication.

But I sense most IGCs are more interested in meeting the requirements of the FCA, rather than going beyond.

It would be good to see IGCs looking at workplace pensions capacity to help people spend their pensions (rather than rely on transfers to specialist drawdown products, annuities or “cash-out” to bank accounts.

It would be interesting to hear the thoughts of IGCs on the opportunity and threats to their policyholder from CDC.

The FCA have said they are looking to extend the scope of IGCs to cover decumulation and non-workplace pensions, it would be good to see IGCs pushing to do more for policyholders and encouraging the FCA to give them greater responsibility.


In conclusion

It has been a great pleasure reading this year’s crop of IGC Chair Statements. During the year I’ve got to meet most of the Chairs and they know how keen I am to help continuous improvement of both the Statements and the work that goes on throughout the year.

To be relevant, IGCs have to be read. It is too much to be expected that the become general reading for policyholders, but there is no reason why IGCs shouldn’t be more in their faces.

Thanks for reading this, please promote the work of IGCs and interact with yours. They are the best way ordinary people have of improving value for money for their workplace pensions.

The same can be said of occupational trustees, who I hope to put under similar scrutiny in months to come.

IGCs 2019 bright




Posted in age wage, CDC, pensions | Tagged , , , , | Leave a comment

The Government’s pension stealth tax

virgin stagecoach.jpg

What are we to make of the disenfranchisement of Stagecoach from rail contracts?

I am extremely concerned by this statement , reported in the Financial Times

 Stagecoach said its recent bids had been non-compliant “principally in respect of pensions risk”. Mr Griffiths and others in the industry said the Pensions Regulator had been suggesting train operators would need to make increased contributions to the railway pension scheme in case the government did not fully fund it. Stagecoach said the gap could be £5bn to £6bn across the sector.

This should be read together with a second statement to be found in the FT report.

 Franchise tenders expected the winner to bear “full long-term funding risk” for pensions, Stagecoach said, which it declined to. While other bidders accepted this condition, Mr Griffiths said the gap “could be very significant over the long term, that was why it was an unacceptable risk and chance to expose our shareholders to”.

On the face of it, Stagecoach are refusing to take a risk transfer from Government to the private sector of obligations to the Railways Pension Fund.

I can quite understand why Griffiths and his partner Richard Branson are crying foul. The Government are moving the goalposts – or rather making the franchisees profit-goals a whole lot smaller. That’s not fair on shareholders and it won’t be fair on passengers, who will get the pass on.

Subsequently the FT have published a second article that hints that t pension clauses in franchisee tender documents is at the Pensions Regulator’s instigation aimed  to protect the PPF from another Carillion and members of the Railway Pension Fund from a weakened covenant.

The article also points out that no-one knows the current state of the Railway Pension Fund’s funding. I was struck by one reader’s comment

Unless the client (franchisee) is is able to separate out controllable risks and ring-fence and pool those, such as pensions, that are uncontrollable they’ll end up awarding contracts to the most cavalier or those with the deepest pockets rather than those best placed to deliver the service.

One  question is why other bidders are prepared to take this risk, another is why members of pension funds which previously had a gilt-edged covenant should be asked to accept a covenant from a rail franchisee in the first place.

A job on the railways came with a state backed pension which was understood by everyone. This point is well made by Mick Cash, general secretary of the RMT railway workers’ union, who warned that his members’ pensions

“are not there to be used as bargaining chips in a row between the train companies and the government”.

Same with schools and universities

Having allowed membership of the teacher’s pension scheme on benign contribution terms, Government is now turning up the heat by requiring schools and universities to pay a whole lot more to participate in the teacher’s pension scheme. For those footing the bill today, it’s a stealth tax on students and parents tomorrow.

This is fine so long as this was always baked into assumptions but it wasn’t and the increased costs are not budgeted for and will become a stealth tax paid by students and parents.

Sympathy for those enjoying higher and private education may be less than for railway workers but the same issue applies. The Government is the insurer of last resort for millions of pensions and the deal between the pensioner and the Government is based on there being a state promise backing the retirement promise.

I don’t get the policy statement that backs up this change in the Treasury’s pension strategy. I don’t see any of these changes in the way the private sector is being to take on public sector pension obligations as a matter of public debate.

I have no particular candle to burn for Stagecoach, other rail franchisees , private schools or universities, but I don’t see why people’s pensions and livelihoods can be put at risk so that the public purse is protected from making good on public pension promises.

Stop me if I am missing something, but I sense that there is something not quite right in all this . I feel like Martin Freeman

Posted in pensions | Tagged , , | 1 Comment

L&G’s IGC returns to form




The L&G IGC Chair report for 2019 and can be accessed from this link from it’s much improved IGC web-page.

Last year I though L&G produced a real stinker of a report and said so.

L&G have my money and many of the employers sourcing workplace pensions through  Pension PlayPen were guided to L&G. I hold the management of L&G in high regard .through their investment company (LGIM) , they’ve innovated, leading the promotion of ESG or what is more commonly known as  “responsible investment”.

L&G are credited with convincing Government not to refer the insurance companies operating workplace pensions to the Competition and Markets Authority. Through its policy and pensions teams , it proposed IGCs in the first place. So the performance of the L&G IGC in speaking straight to members, in offering a transparent view to the value for money they are getting and in effectively lobbying for members and for employers, is of particular importance.

I make no apologies about being very critical of the IGC in 2018, I thought they had taken their feet off the pedal and had produced a lazy report indicative of a lazy year’s work.

Getting back on track

From the moment I started reading the report, I felt something had changed. Here is the focussed and well written statement of the IGC’s responsibilities

Our responsibility to you

We’re committed to protecting your pension. We use our combined knowledge, experience and skills to make sure you’re getting a good deal from your scheme.

This includes (but isn’t limited to) checking that:

• your scheme is good value for money, and the costs and charges are reasonable

• the default funds (the ones you will invest in if you don’t choose something for yourself) are suitable

• the range of self-select investment choices can reasonably be expected to deliver the returns people are looking for to suit their own circumstances and timelines

• you can easily access your savings when you retire, and there are flexible options for taking your money

• you receive clear and regular communications about your pension • you can easily access help and information when you need it, and that customer service is efficient and accurate

We measure how well Legal & General perform across these areas, offer impartial advice when they need an external view and suggestions on how they can improve where needed.

And if they don’t deliver, we have the powers to hold them to account to the regulator, the Financial Conduct Authority

Tone of the report

I enjoyed reading this year’s report which spoke to me in a way that I understood and in a language which was generally accessible. There are times when any IGC report gets technical (the Appendices on funds) but provided these are appendices, I am comfortable.

There is one area where I think future reports can get bett. The chair’s statement is prone to hyperbole.

We’ve continued to be impressed by the quality of people in each and every area of Legal & General that the IGC works with.

(on the sale of the legay book to Reassure) All aspects of the transfer will be reviewed by an independent expert, with oversight from regulators.

We always want to make sure default funds are delivering the best they can for members.

These cases are taken at random but they suggest an imprecision of analysis; faults are found within L&G’s admin which must be down to individual failings – not all the people can be good. If the IGC know in advance that all aspects of the transfer will be reviewed, then their oversight is superfluous and the assertion that the IGC is always on top of defaults is tendentious, it is not for the IGC to be making that claim , it is for the IGC to demonstrate to members that that is what it does. “We’ll be the judge of that!”

My reason for raising these points is to improve the quality of the conversation with members, the IGC does not have to prove itself or justify the activities of L&G in this hyperbolic way. The still small voice is better.

But these are minor areas for improvement, overall I think this report has the right tone and I’m giving it a green for the way it talks to its savers.

Value for money assessment

The IGC are still struggling to get to grips with VFM. They are looking for it in the wrong places and haven’t worked out what really matters to members. In part this is because they don’t understand the dynamics of auto-enrolment and in part because they miss the importance of outcomes over the member experience.

Ironically , L&G are producing excellent member outcomes for the money received , but they are failing many of their stakeholders – especially small employers.

IGC failing small employers

L&G are one of the most widely used workplace pension providers in the UK, this is because they set up many large auto-enrolment schemes in 2012-13 and continued to be active in the mid to small scheme market well into the staging process. They took on relationships with the Federation of Small Businesses (FSB) and promised exceptional service to employers through payroll integrators ITM and PensionSync.

But since 2016 , I have charted a steep decline in its service offered to employers who are required to comply with regulations on auto-enrolment. Many employers complain of not being able to speak with L&G, of sharp increases in the cost of using the link with ITM and third parties (typically IFAs and accountants) complain that their reputations are being tarnished for recommending L&G in the first place.

L&G’s value for money assessment does not take into account the employer’s experience but it should, especially when the employer is spending as much money sorting out payroll issues as it is in contributing (something I’ve heard more than once).

The IGC seem quite divorced from a central dynamic in workplace pensions , that costs to employers of dealing with them, are costs to members. Money that is spent on workplace pensions that does not reach the member’s pot, is bad value for money.

The Chair Statement completely ignores the train-wreck that L&G’s workplace pension has become to many of its participating employers and this continues , despite my , and many other’s protestations. I brought this up at the IGC member’s meeting this year and was reproved for doing so, I bring it up again now as it remains the biggest failing of the IGC.

Anyone reading this statement on administration who has been involved in the problems of the past 3 years, will wince.

Screenshot 2019-04-07 at 08.39.23.png

The IGC must listen to small employers who have complaints about L&G’s support to them. They cannot pretend it is out of scope. They need to make this a priority.

IGC doing good work for members

I am sorry to have to carry on about employer support when I can see so much improving on the member’s side. Last year I was angry with the Chair’s report for delivering adverts from the communication and ESG teams. This year I am pleased to see the promise of those adverts fulfilled.

I am pleased to see policyholders like me getting more value for money and recognise that the insistence within the IGC’s VFM scoring system on good communications has driven this forward

At present the IGC weights all VFM factors equally. They say they will review this in 2019-20 and I hope they will. All external studies, including the NMG report commissioned in 2017 which looked at what savers valued, conclude that people want good outcomes and the experience along the way is secondary to them.

I am also pleased to see the IGC demanding and getting proper reporting on performance but ask that a summary of the fund tables which includes information on Future World – would be helpful as well.

There’s no doubt that L&G’s IGC are well intentioned and that they are working hard towards delivering better value for money for members, but they really need to work out what they mean by “Administration” , include employer interfaces in that and work harder on the promotion of outcomes based VFM metrics.

There is no reason why they shouldn’t, L&G really is providing excellent outcomes for members- I should know.

I seriously considered giving the IGC a red for ducking the employer admin issues but have given them an amber instead. 

I will revert to red next year if the IGC doesn’t take L&G to task and force it to treat its employers fairly.


How effective is the L&G IGC?

I was concerned to read this statement in the costs and charges section of the report

We asked Legal & General to make sure that initial unit charges for Mature Savings members were no more than 1% a year. We were pleased when they did this for active members. But we were disappointed when they decided not to limit these initial unit charges for members who are no longer active.

What this amounts to is an active member discount, something that is illegal for post 2012 workplace pensions (the ones we auto-enrol into). The IGC have not got the legal power to force L&G to treat all mature savers the way, but they have ways of putting pressure on them. One of these is to refer L&G to the FCA.

Whether they do so, depends on whether they feel paid up members of the Mature Savings Group deserve to pay more. If this group of savers are “no longer active ” (contributing?) – it is probably not their fault.

Their employer has most probably closed the scheme or closed as an employer. Why should members be paying more  because of this. Doesn’t this look like L&G charging members to recover costs and is punishing them for what is not their fault really treating customers fairly?

Here is an example of too much weight being loaded into the one word “disappointed”. The report leaves “disappointed” hanging, but I want to see more.

When we read later the rationale for not pressing on this, I am left “disappointed”.

Legal & General considered this (treating active and deferred members the same) but decided against it on the grounds that it wouldn’t be fair to other members of the with-profits fund…

We disagreed with their decision. But as their rationale was not unreasonable, and we recognised that they must consider other factors outside our remit, we decided that we should accept the decision and bring the matter to a close.

I don’t see why the costs of treating customers fairly should be born by the with-profits fund, L&G is a PLC with shareholders who have the capacity to meet these costs from shareholder returns.  What “factors are outside” the IGC’s remit, when it comes to treating savers fairly?

I am not sure that the IGC has pushed as hard as it should have here.

I’m not sure that it’s being totally straight with us about other areas in which it is making claims for itself

Later in the same section we read

We’ve been asking for the drawdown administration charges applied to the members in the WorkSave Pension Plan to be removed and were pleased that Legal & General agreed to do this.

I’m really pleased to see this but I have never read anything in previous IGC reports that was openly critical of L&G’s drawdown charges. I have been very vocal on this matter both to L&G and to the IGC and I’m really pleased that L&G have stopped charging me to have my money back.

For me to be sure that the IGC are really acting in my interests and of fellow savers, I’d like to see something rather stronger than “disappointment” and some transparent criticism of L&G in the report.


In 2018 a lot has gone right for policyholders and the IGC should be credited with having an effective year.

  1. The default fund range is better (including a more responsibly invested version of the default)
  2. The back catalogue of self-select funds has been rationalised
  3. Costs have fallen
  4. The investment administration system has been improved
  5. Oversight of the transition costs resulting from fund restructuring has been effective
  6. Communications are better (especially through the web portal)

The IGC seem involved in all these areas and this report is so much more focussed than last year’s that I am giving it green for effectiveness , with an urgent request to continue the path back to righteousness!

One feels the benign influence of Daniel Godfrey is telling and the keen intelligence and no-nonsense approach to governance of Joanne Segars will hopefully continue this improvement.

In conclusion

The steep decline in the authority and quality of Chair’s reports following the departure of Paul Trickett has been arrested. This report sees the IGC moving back into the black and out of my red-zone.

But it still misses the point on VFM (employers are critical and they are being failed).

It still shows areas where it is ineffective and there are times when the report over-states the mark.

I am an L&G saver and care particularly for fellow savers as I have championed L&G over the years. The inclusion of Joanne Segars on the board is great. The improvement in the Chair report is good and if 2019-20 continues to see the IGC tackling L&G on service and on treating “mature savers” fairly, then they will get a bigger thumbs up this time next year.




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Scottish Widows IGC report – a most interesting read.

scottish widows

The Scottish Widows 2019 IGC report has been published and is available here

In the past few years, Scottish Widows has moved from a quiet backwater in the tidal flow of Lloyds Banking Group to very much centre stream. I have heard anecdotally that Scottish Widows is expected to bring in £50bn of new business in the short term and that the banking group now considers the management of pension and other wealth core to the growth of the group as a whole.

This is the context in which LBG bought Zurich’s DC business (effectively the  Eagle Star /Zurich Assurance corporate book) from Zurich and outsourced the administration of its legacy book to Diligentia.  Scottish Widows is now competitive in most areas of corporate pensions and supported by a wide range of advisers as a workplace pension provider. This is a very different proposition to the one that Babloo Ramamurthy and the remarkably stable Scottish Widows IGC, reported on in 2015.

Sensibly, the IGC has approached its 2019 reporting by looking at the new Zurich Book, the outsourced legacy book and the core workplace business book as separate, How fair it is to have three classes of customer is the elephant in the room. Making this assessment is a challenge that the IGC faces going forward and one it is clearly gearing itself up for. The 2019 report is an interim statement of intent, I sense there is plenty for the IGC to do going forward.

Tone of the report

As I have come to expect, this report is measured, accurate and consistent. If it errs , it is a little boring, it does not purposefully engage the reader as it could, it talks to the reader , but from some distance.

Take this example of reporting on the customer experience.

In general, service performance times continue to see a downward trend since the beginning of 2018, with an average reduction of 20% in customer journey times.

What a customer journey time amounts too and what is meant by service performance times is unclear. These do not sound the words of an IGC but of a Scottish Widows internal report.

I’d urge the writers of the detailed areas of the IGC report (and it does feel as if there are more than one), to focus more on the reader as a lay person and not a pension professional!

Similarly, the report could do with being de-cluttered of wordy titles like this

The experience customers have when interacting with Scottish Widows about their workplace pensions.

Ordinary people don’t interact , they deal or ask. Nobody interacts “about” and “experience” is a rather grim word to describe “what it’s like”.

The stiff formal tone of language is at odds with one of the key aims of the IGC, to get better engagement.

So  I am giving this report an amber for tone, it’s very well written but written for the wrong people, I’d urge the IGC to spend some time with a professional communication team , considering how the tone could better engage ordinary members.

Value for money

The report uses a conventional value for money assessment, described in this picture

Screenshot 2019-04-02 at 06.18.34

This has the virtue of simplicity, but it doesn’t quite tell members the value they are getting for their money, so there is a lot of general comment about fund performance , administration levels and capacity to administer for employers and engage members , but not a lot about individual outcomes.

The IGC clearly haven’t drunk the Kool-Aid on digital engagement.

Scottish Widows has also developed a digital site for employees. Uptake here, however, has been slower, with only 72,000 employees from a potential population of 1,400,000 having registered for the service so far

likewise, they are pressing to know why IFAs don’t like Scottish Widows.

Adviser net promoter scores remain stable, but at a lower level than we would like to see. Scottish Widows is constructing a survey to understand what is causing this and will share its findings with the IGC.

I’d urge the IGC to talk to advisers first-hand , and to do so outside the Corporate Adviser Conference it attended. The damage poor administration and support levels delivered to workplace pensions and their advisers between 2012 and 2016 will take time to repair.

The overall picture, the IGC paints of the three books of business is demonstrated like this

Screenshot 2019-04-02 at 06.17.43

The report is critical of the administration standards in its (formerly Zurich’s) Cheltenham office

I suspect the scoring of the Zurich UK book has yet to be developed and that these scores will be marked up in next year’s report,

The positive picture reflects the research I receive from my company on Scottish Widows performance, it has picked up and the poor returns for Scottish Widows funds in 2018 reflect the aggressive exposure to UK equities rather than mis-management of the funds. This approach has served investors well in the medium term but it is not consistent with the default strategy of the Zurich workplace book and there’s clearly a job of work ahead.

Similarly, there’s a job of work to get the engagement projects initiated in Edinburgh, rolled out for the Zurich customers. My understanding was that the long term aim of Scottish Widows was to use the fund platform offered by Zurich as its principal new business offering. Reading the IGC report , this doesn’t seem to be ready to roll just yet.

I am impressed by the value for money assessment from the IGC, it offers people a meaningful insight into the respective books and is helpful to advisers and indeed to Scottish Widows, in working out what should be done both with legacy and the choices between “modern Scottish Widows” and “Zurich UK”. In the context of what is going on strategically at LBG, the IGC is proving itself very relevant. I give the report a green for its value for money assessment, I hope that next year it will be able to focus more on member outcomes.


Scottish Widows have gone a long way to clean up the mess it had created in its legacy book and its “modern” workplace pensions. I suspect that the IGC had a good deal to do with that . I have praised the IGC in the past for urging Scottish Widows to play an effective part in getting people engaged with pensions, this report highlights initiatives it has encouraged such as the Pensions Bus. Scottish Widows are a force for good in many areas of pension development and again, I think this partly down to the IGC.

I’m also pleased to see that the research Scottish Widows co-commissioned on responsible investment is prominently positioned in the report and discussed at length. This is the one thing that younger members seem really interested in.

I’m not sure about the research itself and I suspect neither is the IGC. The framing of the questions asked to the 2000 people questioned ( a proportion of which were Scottish Widows policyholders) suggests that people were confused by what they were asked.

For example, the IGC reports

“When customers were asked if there was appetite to take ‘some’ investment risk to pursue ESG principles, a majority of customers were resistant”.

I would be resistant to having to take more risk from my investments to have them managed responsibly, My understanding is that responsible investment reduces rather than increases risk. The question could have been asked better.

I hope that the IGC do not take the research to Scottish Widows, without thinking hard about the quality of the research. I fear that if they follow the conclusions of the research, they may be repeating established prejudices inherent in the research questions.

This is not to negate the value of what the IGC has done. I continue to give the IGC a green for its (overall) effective lobbying of Scottish Widows on behalf of members.


This is a good report, it could be bettered with a little re-writing and it could have done without quite so many charts in the appendix. But I welcome proper reporting on transaction costs which is comprehensive, well laid out and useful.

The IGC is clearly effective and working well, it is a success story and deserves wider promotion. I hope that in 2019 , Scottish Widows finds ways to promote the IGC report to all its members, especially to the 72,000 who have signed up to its online service.

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AgeWage goes public!

We started on Wednesday, nervously wondering if we could raise £200,000 from the crowd by the end of May.

We did not count on the support of those we know but we should have done.

This morning we have pushed  to “open”  the link to the AgeWage funding page and it will show that we have all but hit our target in our pre-launch test. As I write we have raised over £188,000.


Last night, I hastily gathered the clan and we agreed that we will press on, raising more than we initially targeted to make our Seedrs campaign a key part in the EIS rise.

And the great thing is that we now have 90 investors who have told us we are worth it. Those who do not know us, will take heart from that. We have – thanks to you – achieved the momentum to make this a momentous fund-raising round.

The rules remain the same for large investors

If you are looking to invest a five figure sum, you may wish to invest directly via our Investment Memorandum which you can request from the site or request from me directly (as several did this weekend). For larger sums, a direct investment can have advantages but these are now diminished as we will be paying Seedrs on all monies received (whether to Seedrs or to us).

So thanks to the direct investors who between them have invested £135,000.

Smaller investors are so welcome

You have the right to remain anonymous if you invest with Seedrs and many of you have chosen that route, avoiding becoming the target for third party marketing.

But – gratifyingly, most of you have told us who you are and your names are visible to new and existing investors. We are incredibly proud that you put your trust in us, and doubly proud that you are happy to stand up and champion.

I am so happy that we have this growing community to work for.

agewage snakes and ladders

Every single investor, no matter how small, is valuable to us. You will be the people who will make us stick to the task, you will be in the forefront of our minds. You are also going to be responsible for maintaining AgeWage’s place on the Seedrs’ pecking order which investors visit, We want to be and stay in the top two rows, you make that happen.

What happens next

We’ve had a lot of people concerned that when they go to they don’t see AgeWage there. That’s because we are hidden.

What happens next is we jump out of our hutch and appear on the Seedrs homepage, hopefully in a very prominent position. Just when this morning this happens, but it will.

And we’ll go on raising money till we have enough (w don’t want to dilute our shareholdings more than necessary but there is a great deal we can do which needs more than £200k!

So get investing and enjoy!

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AgeWage goes public tomorrow – this is why you should invest today!

we need you

agewage snip

Today is the last day before we go public with our crowdfunding. Since Wednesday we have been in private mode and so far 60 investors have invested around £140,000. We have promised today of a further £25,000 meaning that AgeWage will go to the crowd over 80% funded with a strong investor base.

This is unusual and a very good sign of things to come. Once we go live, we can fund for a total of 60 days, assuming we are as successful with the general public as we have been with those who know us, we could be a sensation.

But let’s not get ahead of ourselves. Raising money is one thing, delivering to our investors is another. We are working hard on what we can do and when. We don’t want to be another start up – full of promise – that spent the money without purpose and never delivered its social purpose or a return on its funder’s investment.

Moving into production – the next step

Currently our management team includes me , Chris Sier, Ritesh Singhania and Andy Walker.  We intend to expand this team once we are certain of our finances so that we have the capacity to deliver. We will bring in new people with the skills in marketing to ensure our app has an awesome journey and we’ll build the modelling that people need to get to the financial decisions they need to take.

Our commercial team will build the relationships with partners to ensure we analyse millions of contribution histories and deliver the follow up to our app users.

And we’re going to invest heavily in people who can provide the support you need when you have questions.

Behind the scenes, our technology team in Bangalore will be coding our ideas into applications.

A message for larger investors

But there is never a day when we can afford to take our foot off the gas.  Our message is “don’t delay – invest today”.

If you have several thousand to invest, ask me for our Investment Memorandum which allows you to invest directly onto the AgeWage share register. Today is the last day when we can receive your money without us having to pay a fee to Seedrs, so if you are thinking of investing a five figure sum, do it today.

A message for small investors

Our reason for crowdfunding is to broaden our investor base and have a wide number of champions for AgeWage.  So every new investor is greeted with whoops and hollas in our WeWork office. If you want to get involved, we encourage you to!

Here is how Penny Cogher, a top pension lawyer who invested with us yesterday got in touch

I’m in…yhanks Henry. I think it’s an interesting idea and I’d be happy to get involved
That’s perfect.
We really don’t worry about the size of your investment, we worry if you aren’t investing.  £16.50 is all it takes and you get £3.95 of that back!

A message to all investors – getting your money back!

We think for the long-term but we know that you are investing with a view to getting your money back!

As I’ve just pointed out, everyone gets 30% of their investment back once we’ve closed the round (probably the back end of May). You should also know that you can get more of your investment back if we don’t succeed. You can write off your initial investment against future tax bills if we fail. So only around half of your money is really “at risk”, that’s because you’re investing in an EIS.

But the other half of the money is at risk and at risk of growing very fast indeed. What happens once we close the round is we build out and get a proof of concept that will allow us to raise more money. While this money will dilute your shareholding, it will also mean your shares will be valued at a great deal more.

If we meet our financial projections, the target is that we create proper liquidity for you from three years out. Seedrs offers a secondary market in shares (a bit like betting in running if you know what I mean). But the really big returns will come from the sale of the business, either to a trade-buyer or to the management team. We could also float on the stock market.

Whatever your reason to invest – we hope you do!

We really don’t mind how little or how much, we want you as an investor! We’d love to have 100 investors by the end of today and we’d love to be 100% funded. These things are possible if you work hard for them and we’ve worked hard for AgeWage.

So press this link and get your money down – please!

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Thanks to you – AgeWage smashed day one!

agewage wework

Smashed it.

Thanks to everyone who invested in AgeWage yesterday. We have smashed all expectations. In what is down as a 66 day campaign we raised well over half our funding target in the first 12 hours. Collectively you invested nearly £105,000 in amounts ranging from thousands to the minimum investment of £16.50

To remind you, here is the link to our crowdfunding page on Seedrs

For those of you who want to know what AgeWage about, here’s our pitchbook

If you want our business plan, a comprehensive series of spreadsheets , then please mail me on  We require an NDA which I can quickly turn around.

Here are the great things!

Our landlords – WeWork got wind of AgeWage crowdfunding, saw our numbers and came to my desk with a bottle of Prosecco! This is the kindest of things

Here are a few of the messages I received yesterday.

I’m in. I love this idea, there’s a real market need as currently no basis for comparative rating of pension funds. This “power” needs to be within the mandate of the member.

Good luck, and if I can help, let me know.
Henry. Thanks for the opportunity, I’ve just invested a further (just over) £4,000 which I’m sure you will steward carefully, good luck.
It’s very exciting that you have raised so much so quickly! Very well done!

Building on this.

The most exciting part of all of this is that we really haven’t started yet. We are in private mode, only the people who read my blog and are connected with me on social media are seeing all this.

We don’t go out to the wider public till next Monday!

When we do, we have an opportunity to be pretty well at target, meaning that we will be considered a success by the algorithm of the CrowdFunding platform of Seedrs.


The way that algorithm works takes into account not just the amount of money invested but the number of people who are investing. Currently we have relatively few investors compared with how much we’ve raised.

So if you think you have to invest thousands to be a shareholder – think again! In the world of crowdfunding, your £16.50 is very important.

And once we’ve got your tax back – that £16.50 shrinks!

This business is eligible for EIS relief – providing qualifying investors with income tax relief of 30% of their investment and certain other tax reliefs. Tax treatment depends on individual circumstances and is subject to change in future. Click to learn more.

But as a minimum (and do read the small print) you should see your £16.50 (or multiples thereof) shrink to £11.55 and – if you pay a lot of tax – forget about CGT when it works and write off your losses against tax, if it doesn’t.

Seedrs provide a handy tax calculator which you can access here.

Tax is complicated but Seedrs make getting your tax back a simple business.

What I want you to do – please!

It’s a lot easier to go to some private equity house for your money, or get a rich sugar daddy type sponsor. Getting money through crowd-funding is a ball-ache with a lot of due diligence to even get to the Seedrs platform.

As far as we know, no organisation like AgeWage has gone this route and we’re proud to be the first.

But it wouldn’t be the same without you.

Can you, when you have finished reading this , press the link and buy at least one share?

And then tell your friends!

agewage evolve 1


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AgeWage needs you!


we need you.pngagewage snip


I , together with Chris Sier and a group of business minded pension experts am raising money for AgeWage.

You can help us achieve our goal of raising £200,000, ideally by April 5th (the financial year end).

All you have to do is click this link


As far as we are aware, pensions is virgin territory for the big crowd-funding platforms.

It’s a big step for our start up to be the first pension app to get its funding from the people that will be its customers and to be sure of success, we need the pump to be primed by you!

For as little as £16.50 you can buy a share in our company and seed the great things we plan to do.

Here they are

  • We will work with life companies, their IGCs – with master trusts and large DC company pensions and we will provide millions of people with an AgeWage score.agewage evolve 1
  • The scores will tell you how much value you’ve got for the money you’ve investedAgeWage evolve 2
  • When we’ve shown you how you’ve done, we’ll guide you to the choices you have aheadagewage evolve 3
  • We’ll make it clear how those choices will work for you.

Agewage evolve 4

  • We’ll equip you to make those choices and help you to a better AgeWage.

AgeWage is not here for the 6% of Britains who take financial advice.

We will actively promote the value of advice but we will not compete to be your advisor.

Instead we will provide you , through the AgeWage app with a way to understand what you’ve done, how you’re doing and what to do next.

I think you will agree that this is a bold and important business.

We are grateful to  the FT who have written about what we are doing.

We are grateful to our first round investors who have got us this far.

And now we are asking, humbly – for your money, whether £16.50 or £150,000.

Of course we’re going to make this easy for you, you’ll be investing into an EIS and that means that there are substantial tax-breaks. This business is eligible for EIS relief – providing qualifying investors with income tax relief of 30% of their investment and certain other tax reliefs. Tax treatment depends on individual circumstances and is subject to change in future. Click to learn more.

So if you’re wanting to help us and be a part of the democratization of pension know-how press the link!



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Why can’t we talk about money without paying for advice?


Screenshot 2019-03-16 at 06.27.49

Iona Bain has been travelling around Britain finding out what young people are doing to get help with their finances. She has documented her findings in a great FT article

Shunned by traditional advisers, younger investors use apps and digital platforms

Her travels take her to the usual suspects – Nutmeg, Multiply and MoneyBox though – like any grand tour – there are sites that are missed – MoneyHub, E-vestor and PensionBee (for three). The article is not supposed to be a directory.

I have a few complimentary copies of the article I can share to those who do not subscribe to the FT – mail if you want one.

The A-word and how it’s been

Advice has become a commodity and an expensive one. It’s the caviar to the cod’s roe of guidance, it’s so precious that it is only given to those who can pay for it, through a clip on their wealth. Advice is what millenials want and can’t get – because they aren’t (yet) wealthy.

If you are wanting to pay for a financial adviser, and plenty of us should, then follow the advice in this blog by Paul Lewis. But remember, the fact that you clicked the link makes you a rare (and probably privileged) breed.

At times Iona’s article hints that IFAs are being short-sighted, not focussing on a cradle to grave advisory service. But it concludes that IFAs can afford to wait till the wealth has cascaded before engaging with the young. Advice is a minority sport – like fox-hunting – there will always be demand from the entitled.

But if it’s true, (as suggested by recent research from Drewberry) , that only 6% of people want to pay for advice from a clip on their liquid assets, why does the Ad Valorem model (which collects advisory fees as a clip on liquid assets, prove so popular?

Iona Bain’s article cleverly avoids answering these questions. Instead she feeds back using twitter, the responses to the article.

The harsh conclusion is not that people don’t just want an end to valorem charging, they want an end to advisory-charging. That is a much greater issue for regulators, than protecting the livelihoods of IFAs – who are proving more than capable of looking after themselves.

The Burn-Out generation

My son – who is a generation younger than Iona, seldom answers my inane senior questions verbally.


Olly Tapper

He sends me a link to the answer on one of around ten messaging systems he employs (and I slavishly sign up to). These include Slack, Whatsapp, Facebook Messenger, Twitter DM as well as  and SMS. He has reluctantly signed into LinkedIn (the old folks home) and even messages me on that. E-mail is a work app, but only one of many

The answer to just about everything is downloadable and app management is now essential to avoid  “errand paralysis” . 

In a great article on Buzzfeed (linked above),Anne Petersen points out that Iona’s  is the “burn-out generation” where existence is reduced to “to do”lists organised digitally but never quite completed.

Reading the article – I realised that what has changed is dependency, young people are now dependent on the ready availability of answers to questions from the web.

What they are not getting is ready answers to their financial questions, and especially their questions about pensions. Ask social media what to do with your financial problem and you get referred to a financial adviser.


Lottie Meggitt

I heard the same frustration from another Millennial – Lottie Meggitt – at a recent pensions event.  She more or less accused my generation of not handing down to hers the keys to the secrets we hide in our black boxes.

This ever-present fear that millennials have of not being able to manage for themselves is exacerbated by a financial advisory industry that refuses to play ball. Lottie and Iona’s frustration is not just with the complexity, but with their inability to cut through it. We are in danger of burning-out their patience.

I get this – though I am not sure I am the answer

Actually that’s not true, I am quite sure that I can be part of the answer, though I need Iona and Lottie and Olly to deliver it.

The best that my generation can do is to pass down answers to their questions which they can deliver intelligibly to those around them.

Attempts by baby-boomers to deliver solutions to millenials are doomed to failure. We can only follow.

The first thing we must learn is that the vast majority of financial advice  should be and remain free. The calamity of putting advice behind a firewall and charging for it is that we have alienated more than 9  in 10 people for asking for it.

“I can’t give you advice” is one of the great lies. Anyone can give advice, the question is whether it is worth listening to, not worth paying for. What financial advisers have done is created a means to monetise advice which I and my generation whole-heartedly endorse. We are in fact trying to make ourselves relevant, but we are lying when we do so.

“I can give you advice, but I don’t have time”, would be a more honest answer.

“I can give you advice – follow this link” is the answer my son gives me.

Will the  market find an answer?

Financial services has been slow to answer the need people have to get their questions answered digitally. It’s just not created the way to deliver the answers which are out there.

But the answers to our questions can be found , if only we know how to frame those questions and have confidence in the search process itself.

The encouragement for the market is that the opportunity is out there. The investment of time and energy in delivering the digital advisory services needed requires patient capital and a confidence among investors and entrepreneurs that where trust is gained, reward will follow.

The question is not how but when. I suspect the answer to this question lies with the Regulators. I have the opportunity to speak in a few weeks with the Chair of the FCA and I will be putting this issue at the top of my agenda.

I think it is critical that Government moves with the times and understands the issues raised in Iona’s article. We need to allow people to get straight answers to their questions without the complications of products and product related fees.

We need advice to become free again and for its delivery to be trusted. Pensions Experts  should not be afraid of the A-word but aspire to be trusted advisers (if only through the digital delivery mechanisms created by younger generations).

The answer to the questions raised by the Financial Advice Market Review and by the Retirement Outcomes consultations will not be found in the past but in the present. The questions are being asked by the millenials – which is why Iona’s article is so valuable.

Iona Bain

Iona Bain




Posted in advice gap, age wage, pensions | Tagged , , , , , , | 10 Comments

Why we cannot ignore the NHS Pension Scheme.

doctor writes

Nobody writes about the NHS pension scheme and you don’t see it featuring in PLSA and other pension events.

That is because it generates precious little profit for the private sector. So here is a brief description (thanks Wiki).

The NHS Pension Scheme is a pension scheme for people who work for the English NHS and NHS Wales. It is administered by the NHS Business Services Authority, a special health authority of the Department of Health of the United Kingdom. The NHS Pension Scheme was created in 1948.

The NHS Pension Scheme is made up of the 1995/2008 Scheme and the 2015 Scheme. From 1 April 2015 all new joiners, without previous scheme membership, join the 2015 Scheme automatically. Members prior to 1 April 2015 retain rights to remain in the 1995 or 2008 section of the existing scheme.

The NHS Pension Scheme has 1.35 million members and 650,000 members actively contributing.

The benefits and conditions vary according to the type of worker and the dates of their service; from 2008 the “Normal Retirement Age” changed from 60 years to 65 years while the proportion of pay upon which a pension is based was increased. The benefits are index-linked and guaranteed. They are based on final salary (members who joined before 1 April 2008) or average salary (members who joined after 1 April 2008) and years of membership of the scheme. There are no administration costs. Members can increase their contributions if they wish to get larger benefits (within certain limits).

As of 2016, the tiered employee contribution rates start at a 5% rate increasing in 7 steps to 14.5% on income above £111,337.

If the NHS pension scheme was funded, it would be the largest funded pension in Britain, it might even rival the mighty CALPRS in the States to be the largest funded pension in the world. But it isn’t funded and therefore doesn’t trouble the  asset management scorecard.

To the lay-reader, a pension scheme that serves 1.35m of the UK population would deserve considerable attention – but the UK pension industry has but one master – the fund management industry.

Which is why  bottom-up engagement is more likely than top-down debate. It is why the most vigorous discussions on the NHS scheme (and by extension all state sponsored unfunded pensions) are on social media.

Pension problems for doctors is a problem for the NHS

We should not confuse the apathy of the pension (fund management) industry toward the NHS pension scheme with its potential consequences for the nation’s health service and the nation’s health.  As Nitin Arora points out in his blog (published alongside this), the issues Doctors have need immediate address.

The problem the NHS has is that we have most consultants working ~20% more than full time, with anything over 10PA being non-pensionable; and lots of departments rely on consultants doing extra lists.This is not conducive to efficient tax planning for individuals.

When people realise that their extra 20k of income results in a 12k tax bill, and potentially 3-5k of ‘scheme pays’ they may elect to stop doing this extra work.

Nitin call for action is deliberately targeted at people who care about the health service, whether within or without.

We as custodians of the NHS need to look at the bigger picture, and alert the government to the impending crisis. The taper, AA and LTA together, are going to drive an already demoralised workforce to cut working time. At this time of an overstretched health service, and staff shortages, this would be a disaster.

Why the NHS is not the USS

There is no crisis of funding at the NHS Pension Scheme, there is no question that the NHS pension scheme will close for future accrual, there are no arguments to be found about self-sufficiency. This is because the balance between  Government funding (via taxation) and member contributions is maintained by the Government Actuary without the usual hullabaloo around investment strategy.

The business of the NHS pension scheme is in providing pensions and this singular intent is recognised by its members, I am not aware of any substantial challenge to the Scheme (though clearly there is an issue around the provision of support for members in the decisions they now have to take.

The issues around the NHS pension scheme relate to tax. The suspicion is that the already burdensome membership cost to higher earning members is increased further by progressive taxation . We are used to the pension system robbing the poor to pay the rich – (the regressive alternative), but with the taxation of high-earners pension increases running at as much as 67.5%, there are now serious reasons for Doctors do the “hokey” – the member’s phrase for going “in-out” of the scheme as tax liabilities dictate.

The main difference between USS and NHS is that the NHS is making membership untenable for members while UUK argues that USS membership is untenable to employers.

Giving members a voice.

What I find interesting about the eruption of interest in the NHS Pension Scheme – is that it is happening on twitter. Twitter also provided the platform for debate on USS and Facebook was the platform members of the British Steel Pension Scheme (BSPS) use to understand their “time to choose”.

What is interesting is the attitude of the unions to the mobilisation of their members in these self-help groups (and threads). At BSPS, there was no involvement, at USS, the UCU has been heavily involved in the debate, we have yet to see the extent to which the BMA and other NHS unions will encourage the debate on an open platform or try to confine it to in-house publications and forums.

In my view, social media has become the forum where pension policymakers have most to learn. If I was HMRC or the Treasury (especially GAD) , I would be exploring the different views expressed on the threads that Nitin Arora and others have created.

We have yet to explore the full functionality of social media in assessing opinion. Polls can play an important part in this and are as yet virtually unused as a way of testing the water.

What social media has is scope and – using a limited number of hashtags, social media can provide scope and immediacy to conversations that demand quick and decisive conclusions.

So I look forward to the NHS Pension Scheme debate being conducted in public, as it is today. It is far more healthy for doctors and other members to share their grievances with a wider audience, than be confined to the pages of Pulse.

Posted in pensions | 4 Comments

How to turn a pot into a pension (megablog)

pot into pension.jpeg

Hello and thanks for your interest!

This mega-blog should be helpful to people who are 55 or older and have money “stuck” in pensions which they could do with to replace income from work.

“Stuck” is the right word, most of us would like our money back to spend at some point but don’t know the rules for getting at it and fear we’d make a hash of things if we did it ourselves. This blog is a self-help manual for us lot – and I hope it will be a fun read.

It may also be helpful if you are planning for the future or if you are trying to help others.

Preparation Step one – do your background reading

My first piece of advice is that when you’ve finished reading this article, you press on this link and read Factsheet 91 from Age UK. 

This goes into much more detail than I can here and deals with subjects like the integration of pensions and the benefits you can receive at working age and as pension credits

It also contains valuable advice on avoiding scams, avoiding falling foul of the Inland Revenue and the DWP’s support for those needing (long-term) social care.

Preparation Step two – Think about your need for cash in the bank

Having a rainy day fund for unexpected costs is a good thing. It’s money that can earn interest (as in the Santander 123 account) , it might be money you have in cash ISAs, the important thing is that it’s money that you can get at within a few days without having to worry about stock-markets and withdrawal penalties.

This is your “contingency” fund. You only need it to have enough in it to make you feel secure, it should not have all your savings in it. It’s a common mistake to have all your money in low or no interest accounts rather than working as hard as you do – or did!

You may have enough money in accounts or even too much. If you think you have too much in the bank, then you can start thinking of investing some of that money for the future. If you don’t have enough money in your rainy day fund, your pension may be able to help.

Preparation Step two – think about your debts.

If you have paid off your mortgage and have no debts, skip this bit. If you still have debt then the key questions are when that debt comes due and have you got the ability to meet the repayments. If you are comfortable that you can repay your debts from your income then pensions don’t come into it, but you should know that if worse comes to worse, you can take 25% of your pension pot, without having to pay any tax on it. That money can be used to clear debt.

Preparation Step three – think about your future

You are heading into holiday-time. As you get into your sixties and seventies , you are likely to work less hard and for shorter, that’s why we have pensions, to take up the slack in income and make sure we can do the things we promised ourselves we could do , later on.

You should find out what is due to you as a State Pension and you can do so by pressing this link. You can get a state pension forecast – unique to you – quickly and in a user-friendly statement. Hopefully it will be good news. The State Pension has got better for most people and is much simpler than it used to be. Plan on having a pension in today’s money of around £8000 from 66, 67 or 68 – depending on how old you are – the younger you are the longer you’ll have to wait!

You may have some DB pension owed to you by the trustees of employers you’ve worked for, if you do have , make sure you have an estimate of what is coming to you and when

When you have your state pension, you can start thinking about how you’d like to dovetail work and pensions. What you take out of your pot as a pension should be to fill in the gaps.

For heaven sake – don’t get too strung on getting a financial plan in place where every eventuality is covered. Life isn’t like that, there are bound to be surprises (good and bad). But remember you have your rainy day fund and make sure you think about the other things you own which you could sell – like shares, ISAs and even investment property.

Finally – think about your house and ask yourself if you really could realise any of the equity in it. It’s not as easy to downsize as you think, especially if you have kids and grandkids.  A lot of people think their house is their pension and you can turn bricks into sausages if you qualify for an equity release plan – you can find out about equity release by reading the Equity Release Council’s frequently asked questions.

You could also have a look at Legal and General’s LifeTime mortgage options, which show how equity release works in practice

How to turn your pot into a pension

One pot policy.

You’ll notice that the headline implies one pot. I strongly suggest that you try to bring all your pensions together into one pot and that pot is with a pension provider that you feel comfortable can help you as an individual – do what you want to do.

Don’t think this will be easy or quick, your portfolio of pension pots could run to 10 or more and many of them will have quirks in them that you need to research. Be particularly careful about guarantees, early exit penalties and loyalty bonuses. Transferring pots can be a tricky business. I will be writing more on this in weeks to come.

Do I need guarantees?

Once you’ve got your pot portfolio into one place, the first question you need to ask of yourself is how important guarantees are. If you want a guaranteed income you have to buy an annuity. George Osborne said that nobody would have to buy an annuity again but nobody’s found a way of turning a pot into a  guaranteed pension that lasts as long as you do, that isn’t called “annuity”.

There are a lot of different types of annuity and the key – if this is where your search for a pension ends up is to shop around. My advice is to go and read the stuff on this page from the Money Advice Service .

It may be that you already got guaranteed DB pensions or even guaranteed annuity rates in your DC pots, they are good news and form the platform for your pension , only ditch guarantees you already have after a lot of thought (and take advice).

Would I prefer guarantees – yes – but can I afford them!

What you’ll find when you are working your way through your options is that you are always having to make trade- offs like the one in the title of this bit.

Planning for the future is about guesses – they include guesses which are hugely important like how long you’re going to live, will you need social care as you get weaker and whether you’ll need more or less income the older you get. There are no certain answers to these questions so if you can’t afford to guarantee you have an income to meet all eventualities – at least you’ve got a lot of freedom over how you spend your pension pot.

The pension you,ll be offered from a guaranteed annuity is likely to be a lot less than you thought you’d get for your savings.  That’s why most people move on to other ways of providing a pension.

Would I like money now – or money later?

This trade off is not as simple as it seems. Of course we’d like money now but most people are cautious and save rather than spend. You can save too much and become a hoarder, not spending your money now may be something you regret in later life, when you can’t do the things you’d wished you’d done when you were younger.

But if you blow all your money in your fifties, not only will you be skint in later life , but you may well have given much of your savings to the tax-man. Getting the balance right on the shape of your pension is important. Ideally you’d have a financial advisor helping you here to do your cashflow planning (though every plan comes unstuck somewhere).

If you’d like to do some cashflow planning for your retirement, I’m afraid there is precious little software in the public domain to do so. I am looking into creating a utility for AgeWage in conjunction with some altruistic actuaries. For now we will have to make do with simple rules of thumb, which help us to set our pension from our savings,

Getting the pension rate right

Ok – so we’ve looked at the future and decided we don’t know, we’ve decided that annuities may be too expensive and we’ve decided to look at alternatives.

There is currently only one  alternative to an annuity (for your savings) and that is something called drawdown. Drawdown is a pension you pay yourself from your pension pot and you have the freedom to have it paid any way you want. Sounds good eh!

Well not so fast…

  • If you screw this up you will run out of money later in life
  • If you screw this up you could end up giving a good part of your pension (unnecessarily) to the taxman
  • If you screw this up you could unwittingly deny yourself the chance of the state paying for later life social care

Which is why paying attention to your pension is very important when you are making decisions in your fifties and sixties

The 4% rule of thumb

I think it’s useful to set out with a simple starting point. Divide the amount of money you have in your pot by 25 and you get the amount that most pension experts would consider a safe enough drawdown rate. So for every £100,000 you’ve saved, you can pay yourself £4,000 pa as extra income.

If you want more than £4000 pa then you are pushing it, you may not be able to adjust your income in future years to keep up with inflation and you could fall foul of what experts call “sequential” risk, when your pot is ravaged by a sharp decline in stock markets and does not recover.

One way of making that £4000 pa a little more palatable is to make sure it is paid to you tax-efficiently. I mentioned earlier (for those with need of cash today) that you can take up to a quarter of your pot as tax-free cash. If you need the money now, take it now. But if you don’t need the money, then keep it in your pension fund and you can drawdown the tax free cash in the early years and only take taxed income later on (when your top tax-rate may be lower).

Another way of making sure that your income is higher, is to stack your pot with contributions from cash you don’t need.

You can pay up to £40,0000 pa or your taxable income – whichever is the lower, to boost your pot. You get tax -relief on all your contributions and the money is invested in a tax-efficient fund. Stacking contributions in your pension fund in your final years of work is a good plan if you have cash in the bank not working as hard for you as it should.

Unfortunately, the amount reduces from £40,000 to £4000 as soon as you have drawn money from your pot, so hands off your pot if you are considering stacking!

4% is only a starting point

A lot of people will take a view that they can draw down at much more than 4% and get away with it. They may well be right, most of us will start drawdown before we get our state pension and drawdown at a higher rate as what experts call a “bridging pension”. Once you’ve started getting your state pension you can drawdown at a lower rate and get back on track. Other people will consider inheritances as a similar windfall in future years. Some will deliberately run down their income to avoid the threat of being means-tested out of social care benefits (though you should read the rules on deprivation in Age UK’s fact sheet).

Second rule of thumb – For heaven’s sake – stay invested.

When you start drawing down your pension , you begin a process that could last 30 years or more. It is not something that stops when you are 60 or 70 or even 80. So it makes absolute sense to be invested for the future when you start. Do not move all your pot into a cash fund, this may sound the safe thing to do , but it is the opposite, it will mean that you are stuck with virtually no growth on your savings meaning that you will run out of money later on.

Putting your money in cash is not even guaranteeing you your money back, most cash funds you can buy can go down as well as up and what is almost certain is that the cash fund will not return you the rate of inflation so in real terms , the value of your cash fund will fall. If you are planning on losing out from your investments for 30 years, then go for cash at outset, but you will probably look back and call yourself a muppet.

Third rule of thumb – keep costs down

To keep your money in a pension drawdown fund, you don’t need to be paying away a lot in fees. Remember that 1% of £100,000 is £1000, a lot of money every year. You should not be paying more than 1% each year for your drawdown pot and you should only pay advisers on top, if you feel you really need their advice.

One way of keeping your costs down is to shop around and find the best drawdown provider. There isn’t a lot of good comparative advice out there at the moment (and frankly most of the drawdown plans are far too expensive).  Probably the best place to start looking is Which? – the link’s here.  

The Which table is ok as far as it goes, but it only tells you what you will be paying for the drawdown service (the platform), you have to pay again for the funds which will at least double the platform fee.

If you want to pay an adviser, expect to pay around 1% pa for the first £100,000 of your pension savings pot (less for more). If you have a small pot, you probably won’t find an adviser who will be able to help you.

You will probably find -if you want to stay within a 1% budget that you need to go on a non-advised platform and use the support of the platform. I find Pension Bee and E-vestor the kinds of organisation geared for your needs.

It may be worth waiting for the market to improve, the big workplace pensions like NEST and People’s pension may well open up for drawdown in years to come and it’s likely that there will be more competition from existing pension providers when they do, for now the market looks weak and consumers look like they are generally getting poor value. That’s why the FCA are looking at capping the amount a drawdown manager can charge a customer in drawdown.

Fourth rule of thumb – choose your drawdown investment wisely.

I really don’t see why people who could not choose their own investment funds when saving for a pension, can suddenly be expected to make choices when spending their pot.

But because most of the large workplace pensions don’t offer a satisfactory drawdown option (yet), people are having to move to self-invested personal pensions (SIPP) to drawdown which (by definition) don’t make the investment decisions for you.

I’m sure this will change but for now, if you are investing in a SIPP, then you should look at a fund that is within your budget (I suggest 1%). Remember you have to pay platform fees and transaction costs (see the Which report) so your fund budget is unlikely to be much more than 0.4% and that will restrict you to investing in a passive fund or perhaps something called Smart Beta – which might tilt your investment towards sustainable investments or a more diversified approach than just a single stock market index. Generally speaking diversification is good so if you can get a fund that invests in shares (UK and overseas) , bonds and perhaps a little in other things (alternatives) for 0.4% – that may be your best option.

You want your investment fund to give you as smooth a ride as possible and diversification is a good way to get that smoothness.

Fifth rule of thumb – take your time

If you’ve got this far in one of my longest ever blogs, you are probably pretty interested in this subject and I suspect that’s because you have a personal interest.

I’ll declare my hand, I’m hoping that AgeWage will be able to help people like you to turn pots into pensions and I expect to draw upon the ideas in this blog when we launch the AgeWage blog later in the year.

I’m having to take my time in this – not least because I will need the buy in from the FCA and other regulators to help people with the kind of guidance they need to turn their pots into pensions.

It took me nearly 10 months just to get all my pots in one place. It is taking me as long to research my drawdown options and I’m still not sure of what to do.


Can I help?

As far as I know, I’m about the only person who is actually trying to set up an app for people to learn about this stuff and take practical steps to organise their affairs to convert pots into pensions.

If you found this blog helpful, please contact me on  and we may be able to set about working with each other!

great egret flying under blue sky


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

Why the pension dashboards have to be commercial


Sun Pension Pot

The Sun;s vision of a pension pot is a witch’s brew!

Government pension projects rarely succeed and where they do succeed – it is because the public and private sectors find a way to work together. There are exceptions – the state pension and unfunded public sector schemes are pretty well 100% a Government initiative and the PPF is getting less rather than more reliant on the private sector.

But when it comes to the pension saving market – Government has not found a way to do it themselves.  The public sees pensions – as the Sun sees pensions – as a witch’s brew in a pot!

Recent initiatives have had their moments – TPAS being an example – but generally Government does not do pension guidance or advice well and there is little expectation that it will do a much better job with the dashboard between now and 2025 than it has since 2015.

The SFGB needs our support but it is a backstop

I don’t know anyone who is remotely excited by the Single Financial Guidance Body and I don’t see Pensions Wise as being much more relevant under it than it was in the hands of MAS/TPAS and CAB. The spaghetti soup of acronyms tells us just how little impression Government has made on our day to day retirement thinking.

We expect that the dashboard will be controlled from within SFGB and judging from the people who are being assembled as dashboard experts – we can be sure that it will be very much “not for profit”. This is a holding position, but the Government knows very well that once data is available to us through pension finder services – then the private sector will be very interested indeed.

Data is money – it’s as simple as that. The best that Government can hope for is a well -regulated market where data integrity is upheld and advice and guidance is monitored.

The SFGB will be powerless to stop the commercialisation of the pensions dashboards, nor should it try to.

The SFGB should encourage private sector innovation.

The Government will quickly work out that the private sector is quite capable of finding pensions for itself. If the Government wants to give a centralised contract to one pensions finder service, then people will avoid using that service and scrape their own data. That is because people want to avoid paying through the nose for data , being dependent on a single service provider which might prove unreliable and because people will want to get on with things at their pace, not that of a third party.

So – if we get a single pension finder service – procured at great time and expense , the chances are that the current pension finder services – which are little more than scraping – will simply carry on – with all the data risks that come from sharing passwords and so on.

Sooner or later, people will get tired of waiting and they will get angry with Government for not delivering. Think Crossrail.

And this will bring the SFGB to the public attention and not in a good way. It will become the scapegoat for non-delivery, even if it had no part in what came before.

Plan for the future not the past

The future is digital, it is open source and it is handheld. The deep future may be quite different but for the next five years we can see the direction of travel. It is not the direction that the Pensions Dashboard is taking, that is a direction that looks back to the first 20 years of the century (and we will be looking back by the time we get anything).

The future is represented by Pentech and the dashboard should be designed for and by people who are familiar with open source data. Government should stay well out of the way. It’s job is to ensure that the data standards are common and to root out the rotten apples, it is not to stand in the way of change.

Similarly, what the dashboards show should not be a matter for Government (other than that trading standards should apply). The old distinctions between guidance and advice need to be reviewed so that everyone can make decisions about what to do with their retirement funds with confidence.

The future is not going to be about sitting down with an adviser for two hours, it’s going to be about user journeys that make sense to ordinary people and take them to guided outcomes that are generally right. We will revert to a default culture which will replace pure collectivism with rules of thumb.

The future belongs to the brave

Necessarily, those who will be at the forefront of dashboard innovation will be entrepreneurs. It is impossible to imagine that Government, the ABI, the PLSA and the PMI are going to drive change.

The change that happens will be driven by self-interest  which is what drove Isambard Kingdom Brunel and James Watt and it’s what has made Apple and Google and Facebook change the way we do things. Government can only be responsive to change – it cannot be entrepreneurial – nor should it.

This may sound disruptive and I expect that many (including the many who packed Prospect’s office to opine on the dashboard) will see me as precisely the kind of person who shouldn’t be allowed near a commercial dashboard.

I love Origo’s vision of the commercial dashboard – it tells me just how far the pensions industry is wanting to keep this dashboard to itself!

dasboard suspects

Origo’s veiw of the world

Here is the dashboard that I put together with the Sun’s Mr Money – sorry about the lack of digitality in either image!

find a pension 3

There comes a time when people just get fed up with waiting and all the fannying around and just want to get on with finding their pensions and spending them.

That time is now.

We need commercial enterprises to help ordinary people to get their money together and get it back. We do not need more guidance from Government or governance from the Guidance Body.

Those of us in our late fifties are growing into retirement with practically no help. It is time we got it. The dashboards can help but they will only work if they are commercial.

No Government initiative is going to work on its own, Government must now allow the private sector to get on with satisfying the public’s thirst for information, guidance and advice.

Exploit is  the wrong word but meeting demand is what we are about and there is no doubt that the public demand a commercial service that helps them retire properly.

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

Should your house be on your pension dashboard?



You can’t buy a sausage with a brick

James Coney, one of our best financial journalist has written a very fine article in FT Adviser on why he wants to “leave property our of pensions dashboard”.

It turns out that the Equity Release Council has been lobbying to get the un mortgaged value of your house onto your financial balance sheet, so when you see you’ve got no savings, you don’t burst into tears but nip down to your local friendly equity release specialist and liquidate your bricks and mortar.

James is against this

If there is one financial question every British person knows the answer to, it is how much their house is worth.

We are utterly obsessed with property prices. What is more, our attitude towards property has led to many people to make some very bad financial choices.

And these are just two reasons why housing wealth should not be included in the new pensions dashboard (another more obvious reason being: a property is not a pension).

It is of course impossible to stop people considering their finances in the  round. The idea that a pensions dashboard can frame our thinking on retirement planning is fanciful but that is to jump ahead of my argument.

The “bad decisions” he’s referring to are to do with over reliance on property equity and under-provision of the replacement income we need when we stop working.

The article turns on itself as it explores the relative merits of downsizing and taking a lifetime mortgage. It hints at what is a very real moral hazard, that if you are so skint in retirement that you have to mortgage your house to live properly, you are certainly not going to be able to pay the costs of long term care (other than by selling your house).

The moral hazard is that people assume the right to state care and recognise that that care is means tested. If you are planning on a state assisted later life, then you should burn your equity and your potential income. Since most equity release plans don’t ask any questions about how you spend the cash released, the opportunity for people to game the NHS and the social services funded by the DWP is obvious.

We pay far too little time thinking about how ordinary people consider housing, later life income and the threat of needing long-term care.

Self sufficiency?

The over reliance of a very large number of people on their house as their pension also misses an important historical factor. Those people who pushed their finances to the limit to buy a house and keep up the mortgage payments, often did so by not paying into a pension.

Their idea of property investment was to be independent of pensions – which many people see as a black hole into which you pour your money, never to get it back.

The tangibility of a property is pretty obvious, it is a place to live and – if rented out, is a self-sufficient asset. Property has become a free lunch – with low interest rates, high rents and a seemingly inexorable rise in property prices.

The housing shortage , which the Government continues to talk about – without building houses, keeps property prices high. The tight control of interest rates keeps away the perils of negative equity, the young are priced out of the market – but they don’t vote.

All this has the smell of a rigged and rickety market with the potential for a real fall in property prices which could have very nasty social consequences – especially for those for whom property underpins their lifestyle, retirement plans, their legacy and their long-term care insurance.

Far from offering self-sufficiency,  a property can and does give a false picture. Which is how James leaves his argument.

People who rely on housing equity or investment income from rental property to fund their pensions are playing a scary game, the risks of which are underestimated.

Or a contingent asset?

The terminology of Defined Benefit pension funding is useful here. Most people do not achieve financial self-sufficiency when they enter retirement. They have to carry on working – or they rely on their savings whether inside a pension wrapper or not.

The house is the back-stop. It acts as a “contingent asset”, something that is pledged to be used but only as a Plan B or C.

If people are having to rely on work and savings to produce income, then they are taking on a lot of risk, risks associated with health, interest rates, markets and people’s capacity to make financial plans and keep to them. There are many calls on older people’s money and most of them cannot be anticipated.

So the financial backstop of a lifetime mortgage is a tremendous advantage to someone who has not achieved self-sufficiency. It makes for a much more relaxed prospect for someone reaching the end of their working life.

Which is why I am very much for equity release, especially the responsible varieties such as Legal & General’s Lifetime mortgage. So long as property is viewed as a contingent asset and not as the answer to all life’s future property, I see it as key to the financial security of most older people.

Property equity is a contingent asset which should form an important part of financial planning for later life

Messaging and dashboards

I am concerned that the expectations of politicians and the proletariat for the dashboard are being set too high. In particular – I fear that “trust” is being commandeered by the pensions industry to justify “control”.

The current obsession with controlling the messaging will doubtless be reflected in the DWP’s consultation response due out shortly.

It is the easiest of wins for those who respond to these consultations to demand high levels of centralised governance resulting in a state dashboard and a few highly regulated portals that plug into a single pension finder service.

It is very unlikely that anyone from the pensions establishment  will have written to the DWP telling them to let the market control the messaging. Here for instance is Prospect’s report on its recent dashboard meeting with the Minister.

“All feared the potential for confusion, and some the possibility of exploitation if commercial players had too much scope to fashion the presentation or in any way edit the contents of the dashboard”.

Controlling the messaging from pension dashboards will be quite beyond Government or the pensions industry. People want access to data on their pensions and they want to take control of their savings. They will include housing in their thinking – they would be mad not to.

I hear the splashing of water around King Knut’s chair.


Should your house be on your pension dashboard?

The argument of this blog is this

  1. James Coney’s article is right to raise the question
  2. The interaction of housing on pension savings is perverse and underestimated
  3. People who rely on house equity to be self-sufficient in old age are usually deluded
  4. Housing equity is a good backstop or contingent asset and shouldn’t be ignored
  5. Messaging from pensions dashboards can’t be controlled (worthless power of kings)
  6. With responsible positioning housing could and should feature on dashboards.

I think, were James to read this blog – he’d ultimately come to the same conclusion , despite his title suggesting the opposite.

Posted in pensions | 3 Comments

Pension dashboard stitch-up exposed!

pp dashboard.jpg

I find myself the horns of a dilemma. I violently disagree with the ABI, Origo and at least two of the big master trusts. In particular I disagree with People’s Pension, who normally I agree with and Gregg McClymont- one of my favourite people. I do not think them dishonest, but – in the pursuit of their aims- I find them saying things for what they believe the greater good – that amounts to a “stich-up”.

My beef

Like everyone, I reckon the pensions dashboard , a “once in a generation” opportunity to put people back in control and restore confidence in pensions. The dashboard could help people to find their pensions, understand their likely position in retirement and do something about making the most of what they have (including their savings rate).

However this is achieved is secondary to it being achieved, so the comments below are based on a fundamental agreement with all parties that the fundamental aims of  dashboards are good.

But I have a beef and this is it.

The major pension providers and the organisation they set up as a pensions data clearing house (Origo), want to orchestrate the finding of pensions meaning that they control the means of dashboard production. They have convinced the DWP to write a consultation where there is only one pension finder service and only one data validation service. There can be no doubt that in a procurement process, the provider of that service would be Origo, with the help of a couple of subsidiary companies.

I believe that this is a stitch up and it will lead to no good. Here are my five reasons why

  1. The DWP are in no position to determine the technical architecture of the dashboard. They do not have the skill set to call the market, the procurement process will delay implementation and what will be delivered will be subject to the same problems that have led to failed roll-out of Universal Credit. Putting the DWP in charge is a mistake. The DWP should not prescribe the technical architecture of the dashboard.
  2. There is proof of concept for a system of open sourced pension finding (rather than the single pension finder service proposed). It is called open banking and it has worked. We now have faster payments, integrated data and an altogether better banking system than we had before the implementation of the CMA 9. This is despite the protests of the big banks who adopted precisely the protectionist position the large insurers and master trusts are adopting today.
  3. There is, outside the hegemony of the biggest players a nascent “pentech” sector , it includes soon to be household names such as Smart Pensions, Pension Bee and infrastructure players such as Altus, F&TRC and Pensionsync. Data aggregators such as MoneyHub, MoneyBox and AgeWage are keen to provide better information on pensions to the 94% of us who do not pay for advice. The single pension finder service will make them reliant on a centralised , old school, approach that will prevent them innovating.
  4. The arguments for the single pension finder service and the oligopoly it would be created are based on a pensions “project fear”.  They are protectionist and self-serving. We are told that it would lead to less data security, more expense to the providers and a lack of consistency with which the data was presented. These arguments fly in the face of the actual experience we have had of open banking, they are the same arguments as the retail banks put up to prevent open banking, they were rejected by the CMA and they should be rejected by the DWP. The counter-arguments are stronger as they are evidence based (see below).
  5. The original conception of the Pensions Dashboard , back in 2016 (Treasury led) was for open pensions where the dashboard would foster innovation and best practice. It has taken three years to get nowhere listening to counter arguments from those with an interest in the status quo. The status quo is rubbish, people can’t see what they’ve bought, can’t plan for the future and the DWP’s proposed timeframes for delivery of the dashboard are so long that it is unlikely people will genuinely benefit from these dashboards for five years.

To summarise

  1. The DWP are out of their depth and should leave this to the market
  2. Open Banking shows pensions a better way
  3. There is capacity to build open pensions
  4. The arguments against open pensions are protectionist
  5. The proposed roll out of the dashboard will be too slow, we need action now.

Why I have to say this again.

All of this has been said in previous blogs and in articles in newspapers – by me, by Pension Bee and by many others. But our voice is a small one and it is drowned out by the lobbying of the ABI and friends.

Before the launch of the consultation, the Work and Pensions Select Committee were assembled to hear the voice of this lobby. Frankly that was bad Government, no ear was given to the Pentech position.

Now, with the launch of the consultation’s findings imminent, we find that senior MPs, including the Pensions Minister are being entertained by Prospect Magazine in a meeting arranged by People’s Pension.

What is more, the write up of this meeting is being publicised on social media as a genuine debate.

But reading the Prospect Article that came out of these differences I find that someone’s moved the cheese.

The differences were akin to arguing how many colours you paint the car and ignore the arguments for a choice of different engines and chassis. Whether allow people to see the data through multiple dashboards or just one is irrelevant – how people access the data is up to them. Open Pensions is not about seeing numbers on your phone.

Open Pensions is about creating a data sourcing infrastructure as consumer friendly as exists in open banking and a state sponsored app just doesn’t add up.

Where were the Pentechs?

The Pentechs were not invited to the event, the consumer groups who were have a quite different agenda and the debate allowed the ABI to pretend to Guy Opperman, Nicky Morgan and Ian Murray that there was consensus on the fundamental dashboard architecture.

Every one of the project fear arguments can and should be tested. All will be found wanting in the light of actual experience of Fintech in the financial sector.

The single pension finder service will lead to greater risk of outage of supply, greater risk of cost hikes (a sole supplier) and it will lead to the stifling of innovation. The DWP should wake up to this as the Pentech firms aren’t going away and we will not sit in a dark corner.

The chance to be good at pensions (again) on a world stage, is being missed.

And the blueprint on how open standards could improve the dashboard has been presented to Government and the pension industry.

This debate should not be held behind closed doors

These arguments were excluded from the debate, the pseudo-debate that happened was a convenient smokescreen.

There is a space for a genuine pensions debate and that’s what should happen as a result of the consultation. The lobbying of ministers and senior MPs prior to the publication of the consultation, and the presentation of the debate in the way that it has been engineered is a perversion of parliamentary process and needs to be called as such.


pp dashboard

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

Now and then.

now that's

It all started so well – and ended so sadly. Yesterday NOW’s owner, the Government backed Danish Pension Fund announced it was selling it’s UK master trust to Cardano, the Dutch Fiduciary Manager.

NOW were the first organisation to seriously compete with NEST as an occupational pension scheme. They made it absolutely clear where they were coming from and they set their stall out with conviction

  • Just one fund
  • A Segregated Fund unique to NOW members
  • A Trustee Board drawn from the great and good
  • Outsourced admin

The original vision we were sold at launch also included free life-cover – though that never quite happened.

I remember the launch, a grand affair just off parliament square, it was like a film premier. NOW was launched at a time when its first customers were the large employers without a pension scheme. Employers like ISS who has a workforce in six figures, cleaning trains – they were early stagers and chose NOW.

NOW’s early success was predicated on purchasing employers getting the NOW story. It was that the Danish pension system – was deemed successful because of ATP – the owners of NOW. NOW was popular with Danish owned companies, especially in the shipping sector. If there was a Danish ex-pat in charge of your employer – you got NOW.

NOW’s second phase distribution strategy was to go after large accountants with whom they did deals in return for those accountants using NOW pretty well exclusively. It wasn’t a bad distribution strategy and for a time it worked.

But after a year or two, the large employers who were NOW’s flagship customers started raising alarm bells. Money wasn’t being invested or it was being invested in the wrong place. Money wasn’t being collected or the wrong amount collected. NOW had outsourced the record keeping and contribution collection functions to third parties and had trusted that the third parties would work together. They didn’t.

What actually happened was that NOW lost control of the most important piece of the jigsaw, customer support.

Before long NOW felt it had to switch its original record-keeper, Entegria (Xafinity) . It replaced one third party with another – JLT. In doing so it created the infamous black-out where employers were completely shut-out. It was scary for employers and it freaked out the accountants who had been sold a tale of Danish efficiency and super-clean compliance.

A number of high profile clients – including the biggest by employees – ISS, walked. ISS actually replicated what they were doing with NOW with JLT.

By 2015 the Pensions Regulator was involved and what followed was three years of torrid discussions between NOW’s trustees , its management and an increasingly angry regulator. Poster-boy CEO- Morten Nilsson fell on his sword and was replaced by JLT backroom fixer – Troy Clutterbuck.  NOW ditched its middleware supplier and finally created a dedicated customer service unit in Nottingham. But the damage had been done.

From being top-rated for its vision, Pension PlayPen gradually down-graded NOW for its appalling customer service and the failure of its systems and processes. By 2017, nobody was using NOW.

Where did NOW go wrong

The original vision for NOW was grand (I mentioned its launch felt like a film premiere).

It hired the then top DC players from the occupational market and its architecture was that of the classic unbundled DC scheme of the first decade of the century. NOW’s Trustees were and are trophy. Nigel Waterson arrived from Westminster, a few votes more at Eastbourne in 2010 and he not Steve Webb would have been coalition pensions minister. John Monks was a senior Union man, other trustees had similarly luminous backgrounds in the pensions industry.

But all this glitz blind-sided NOW. They bought the Kool-Aid of the consultants, by-passed the tough job of setting up a proprietary admin system and dedicated customer support. They totally didn’t get the payroll challenge – leaving the interfaces to “middleware”.

NOW were about investment and in particular the investment approach advocated by ATP which was implemented impeccably.

The think that finally sunk NOW was not the train-wreck admin, but the failure of the investment strategy to deliver short-term returns. What happened was the BREXIT vote and NOW’s strategy was predicated on Britain remaining. NOW hedged its currency positions and failed to pick up on the huge gains that could have been made from the currency markets. Relative to its principal rivals (apart from Standard Life’s GARS – which got caught in the same trap), NOW’s investment performance was abysmal.

Had it had its intermediaries and employers on side, this might not have mattered, But they had lost both those training rooms and NOW were horribly exposed.

The final nail in the coffin was NOW’s reliance on its use of a tax-relief system that was de-rigeur for its original clients but which turned out an albatross around its neck. NOW’s members were and are a varied bunch but very many of them fall into the net-pay trap and are not getting the Government Incentives promised by HMRC – because NOW does not use Relief at Source. Worse- all the GPPs and its two principal rivals – NEST and People’s, use Relief at Source. NOW have commendably campaigned to get HMRC to give Net Pay the same advantages to the low-paid as relief at source but without success.

Although NOW has righted the ship with regards record keeping and contribution collection, it still has some fundamental problems which Cardano are inheriting. Apart from the net-pay problem, NOW has a very large of very small pots. These pots are not uneconomic to NOW because NOW charge the pot-holders £18 pa to maintain them. The trouble is that small pot holders aren’t getting much return on their investment and if the pot isn’t getting new contributions , it is gradually being eroded by the charge. Watch out for some newspaper or other discovering a bunch of NOW members whose pots are so small that they cannot meet the admin charge. Try explaining to an ordinary person that their pension provider has just eaten their pension and check the reaction.

So why did Cardano buy NOW

NOW is Britain’s third largest master trust in terms of membership with some 1.7m people having a NOW pot. Well that’s what we’re told though record keeping has never been NOW’s strong point and we can only guess how many pots are duplicates.

NOW has accumulated a decent fund – we aren’t told how much but I believe it is north of £2bn and it boosts Cardano’s assets under management by up to 10%.

No doubt Cardano have considered the risks that NOW brings with it (see above) and feels suitably indemnified to take them on.

To the 30,000 businesses that remain with NOW, the news of change of ownership will not mean much. For admin it will be BAU and investment considerations are pretty low down an employer’s priorities.

Among members, there may be a little frisson of interest, but the number of people who will understand the difference between NOW and Cardano’s investment style’s are pretty small.

Consultants may feel a little aggrieved that they have unwittingly supported what (for most of them) is a rival proposition.

For a small bunch of idealists, who genuinely believed the NOW story back in 2010, this is a sad conclusion to what could have been a great enterprise. It is very hard to be excited about NOW owned by Cardano.

So what of the future?

It will be interesting to see if Cardano change the model. They might get rid of the trophy trustees who look like white elephants in the room. They could tackle the systemic issues associated with small pots and the net-pay collection system (though this looks a tough one).

But I doubt they’ll make many changes. Troy Clutterbuck looks like staying on – his feet are well and truly under the table. Having switched administrators once, NOW will be unlikely to do so again (even though it is JLT who are blocking the move to Relief at source).

I doubt that there’s much appetite to put new employers with NOW in the immediate future and so that 30,000 employer number should stabilise.

NOW need to really deal with small pots and get involved in what their policy guru Adrian Boulding calls “prisoner exchange”. The potential practice of swapping small deferred pots with other master trusts (pot consolidation).

If it continues to run down small pots with its admin charge, it will find itself in deep water. It will similarly find the take-up of its compensation offer on net-pay unsustainable in the longer term.

Cardano are going to have to get their hands dirty on these issues and I’m not sure that they are that kind of organisation. I know Cardano well and will be asking them what their intentions are.

You shall know them by their fruit.



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

Who are these pension delinquents?

Pension delinquents

The weekend has seen a fair bit of interest in pension saving. This morning’s Wake up to Money featured Ros Altmann celebrating 10m new savers auto-enrolled into workplace pensions.

Sunday’s lead story was Amber Rudd’s threat that she and the DWP were coming for future Philip Greens.

As I was finishing yesterday’s blog damning Rudd’s sensationalism, the phone rang asking me to come over to Broadcasting House. Within an hour, I’d done a three minute spot for television and snippets of what I said were reported on stations as diverse as Radio 2 and 6.

I focussed on the balance that needs to be kept between the needs of employers to keep going and the needs of the pension scheme to meet its obligations. I also called on ordinary people to pay more attention to the defined benefits pensions they are lucky enough to be in.

It is really not helpful to scaremonger and Rudd’s “coming for you” comments were also criticised by Wake Up to Money’s Louise Cooper who questioned whether this kind of employer delinquency was top of the pensions agenda.

Sadly, it seems it is the easy target for politicians seeking to make political capital. The wrong focus means that bigger problems – such as the net-pay scandal and pot-proliferation in auto-enrolment are swept under the carpet.

The success of auto-enrolment has been about employers behaving responsibly. A shame that the big message of the weekend was about the existential threat to pensions from sponsors unknown

The 10m figure hit – a pensions good news story

Ros Altmann’s contribution was eloquent on the need to protect defined benefit members, though she ran out of time to say much on auto-enrolment.

Sadly she had to spend more time calming the waters stirred up yesterday than celebrating the 10m milestone.

One person (not me) had emailed Wake up to Money , complaining that he/she had already built up several pots under auto-enrolment but had no way of merging them. The issue could not be discussed for lack of time.

Instead Ros chose to stay “on message”, celebrating the 10 million “new savers” milestone. Considering over  a million of the new savers may not be getting promised savings incentives (owing to their being low-paid and in the wrong kind of scheme), I’d half- expected the great campaigner to seize her chance.

But perhaps Ros was right. 5.30 am is perhaps not the time to get inside people’s heads with more pension issues. 10m new savers are about to experience their big contribution hikes in just over a month’s time. They need all the encouragement they can get.

We need a lot more of Ros’ positivity and a little less employer bashing from our Secretary of State.

Delinquency from opting-out?

I usually listen to Wake Up to Money because I’ll hear something new and Ros had been billed as talking of ways to get those not saving to save into something. This conversation didn’t happen.

But it should! If people don’t save into a pension in the workplace, it’s either because they’re not eligible for auto-enrolment or because they’ve opted-out. Those who aren’t eligible include those not on PAYE – the self-employed , those who are too old – too young and those who don’t earn enough to hit the auto-enrolment threshold (£10,000 pa).

We hear very little from those who opt-out. I hope that we will hear more. Some opt-out for good reason – they may be protecting their Lifetime Allowance. Some opt-out because they simply can’t afford to pay anything into pensions , but most opt-out because they do not see the need to save. We don’t know the splits or whether there are delinquents who choose to rely on the state rather than their own efforts.

Prioritising the real delinquents

It seems odd to use the same word to describe bosses who underfund pensions and employees who ignore them. But “delinquent” is a good word as it describes both minor crimes and – in a more legal context – a  breach of duty.

Where employers are in breach of duty , we have a Pensions Regulator with the powers to enforce compliance.  Will giving them extended powers to mount criminal prosecutions against miscreants choosing to invest recklessly, or saddle pensions with debt (presumably Rudd meant “liabilities” rather than “bonds”), make any difference?

Will any prosecution ever be successfully brought which relies on the basis of Rudd’s definitions? I think it very unlikely.

Where prosecutions can and are being made (both criminal and civil) is in the areas of pension fraud and deliberate non-compliance with auto-enrolment. Here pensions delinquency is under the scrutiny of the Pensions Regulator (with varying degrees of success).

Unlike the cases of BHS and Carillon – which the DWP cite as provoking this new round of sabre-rattling, the frauds against individuals from scams and from the non-payment of auto-enrolment contributions, are very real.

As I hinted at in my comments to the BBC, the non-payment of the promised incentive to those not qualifying for pensions relief at source, may be the most real fraud to future savers and one the Government do not want to talk about.

Policing the problem we can solve

Opting-out is another form of pensions delinquency – where it is done recklessly and with intent that the saver relies on someone else (usually the tax-payer) to make things up in later life.

We should not sanction this kind of delinquency, we should try to understand it and deal with it where we can. But surely this is no more the priority than chasing after delinquent sponsors of defined benefit schemes.

Instead, we should be focussing on the areas where the Pensions Regulator can make a difference, protecting savers from scams and the non-payment of promised contributions.

And we should be focussing on the matter not discussed today – how we encourage those outside of auto-enrolment to save for their retirement.

Once again, the good work of a million new employers is being undermined by silly-talk about bosses playing fast and loose with DB pension liabilities (and assets).

The real shame about Rudd’s comments this weekend are that they deflect from the good news story of improved pension coverage and focus on the wrong problems. 

We have the pension policemen, politicians need to focus their attention on the real problems and not grandstand for votes.

Pensions Regulator

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

What do we mean by fiduciary care?

store pod

Travelling back from Newcastle last week in a much delayed train, the passengers in my carriage were trying to get to sleep. It was tough as the carriage were illuminated by the brightest of stip lights.

Eventually some of us summoned up the energy to find the train manager who – along with the train management team appeared to be having an extended cup of tea. One of us asked if the lights good be dimmed, the management team seemed shocked and the manager asked “why”.

We did eventually get the lights dimmed and those who wanted extra light used their individual spotlights above their head.

I thanked the chap who asked the question and he replied “so much for customer care”.

This is an example of a whole train being kept awake because the train management team weren’t paying attention to the needs of their customers.

It’s a good example of a failure in fiduciary duty, in the end it was a member of the collective who changed things and took control.

An example of fiduciary failure

There’s a good discussion about fiduciary care in this linked in post by Ben Fisher.

The post is a story on BBC about a Welsh worker who’s lost his pension savings through a Storepod investment . The investor bought the pod and thought that the trustee of his SIPP would make sure that the pod was used. It wasn’t and the pod is now worthless.

He said: “I phoned Store First, and a lady said ‘Your store pods are empty.’ I said ‘What do you mean they’re empty? They can’t be.’ She told me they’d been empty for two years… Nobody had contacted me to tell me.”

The investor had assumed that his trustee would look after him but the trustee did nothing (a git like the train manager).

Store First said they were never contracted to manage, advertise or let the storage pods – that responsibility, they say, lies with the pension trustee, Berkeley Burke.

It said: “Mr McCarthy has not purchased any store pods direct – he has instead arranged for a trustee to buy them, as part of his self-invested personal pension.

“We have asked the trustee, on two separate occasions, if they would like Store First to manage their store pods.

“The trustee has not however returned the management agreements we have sent to them. That is entirely within the power of the legal owners of the store pods. Store First cannot, and would not want to, force any investor to use Store First’s services to let out their store pods.

Where is the duty of care?

The notion that the customer’s interests come first, appears not to have occurred to Berkeley Burke.

No doubt they will argue that self-investment means just that – you manage the investment for yourself.

Judging by the incredulity of the investor, this notion hadn’t occurred to him.

So there you have it, investors being told to get stuck into an investment they have to manage themselves while the provider takes no responsibility for the investment other than to provide a platform and a tax-wrapper.

Who’s is the duty, the investor, the trustee or someone else?

I suspect that the original adviser (who went out of business shortly after recommending Store First and Berkeley Burke will not have the resource to compensate, if the Financial Ombudsman finds in favour of the investor.

That responsibility will then fall to the Financial Ombudsman and the Financial Services Compensation Scheme, funded by the guys who advise and don’t go bust.

The duty of care reverts to those who care.

Restoring confidence in pensions?

Clearly people expect those who manage their money to exercise a duty of care. In a recent conference NEST told delegates that when asked, members said that by investing in the Government pension , they expected the Government to provide them with a pension.

People don’t expect to be on the hook for managing risks when they have paid others to do just that.

Whether it’s NEST  or the Berkeley Burke SIPP, people expect the people who they pay to manage their investments to manage their investments.

When this doesn’t happen, they are incredulous. Just as I was incredulous that the man who managed the lights on our train asked why at 11.45 pm people wanted the lights turned down.

I am sure that every time a complaint is raised against a railway company or a pension provider , confidence in the service is eroded just that little bit.

Which is why the customer experience matters every time.

When fiduciaries stop caring, we really will have to start managing our money ourselves.

Proper outrage.

It matters a lot that fiduciaries care, whether they are running NEST or a SIPP or simply advising.

The retail pension system, though it might appear to be every man for himself, is much more collective than at first seems. Compensation is collective and so is the perception of “care”.

I do not currently have to pay the FSCS levy or fund FOS but failures like the management of this man’s Storepods are damaging to me and my business interests.

I’m glad to see the proper outrage from those commenting  on the article.

Someone has to care!

Posted in pensions | 1 Comment

Trustees and transfers

Jo Cumbo’s article in Pensions Expert on contingent charging takes a dim view of trustee behaviour to date.

Her idea that advice to stay in a DB scheme could be paid for by docking the original pension has got some support, importantly from Sir Steve Webb


Certainly trustees haven’t been involving themselves in offering guidance, though that could change.

Adrian Boulding’s suggestion – posted on my “planning permission” blog is as follows

I can see a case for a “pre-advice” service, costing not thousands of pounds but hundreds of pounds, that would provide an indicator as to whether full advice is likely to say either yes or no. It would just need an algorithm asking key inputs like your age and wage…….Maybe scheme trustees could offer this service.

The only bit of that , that I’d disagree with is that this kind of triage should cost hundreds of pounds. The key inputs can include a “why are you interested in transferring with a “tick one box” capture, including five or six reasons such as

  1. I don’t think I’ll live long enough to enjoy my pension
  2. I need cash now to pay my debts
  3. I think I can invest my transfer to give me more in retirement
  4. I want the flexibility to spend my money how I like
  5. I’ve been told to look at a transfer by someone.
  6. I’d rather have the money in my bank than in a pension


 1 and 2 ;- the needy

A few questions as to the motivation of the person making the inquiry would quickly establish where this person should go. There are some very obvious danger signs, people trying to draw cash out of pensions before 55 should certainly flash a red light. Tax-free-cash can of course be used to pay off debt but anyone thinking of mortgaging their retirement needs debt-counselling and fast. A responsible pre-advice service can sign-post the free debt counselling availably locally through citizens advice and centrally through the Money Advice Service (now part of the Single Financial Guidance Body).

Where the motivation is driven by the inquirer’s concerns over their health, it’s a different matter. Many people do not realise that were they to die before drawing their pension or as a pensioner , someone else can be nominated to receive a residual pension as a dependent. Obviously a lot of this comes down to definitions but this is an opportunity for trustees to properly promote the scheme’s capabilities before the inquirer is referred to a financial adviser. Defined benefit schemes employ administrators who’s job it is to explain these things and if the administrators can’t do that job, it may be time for the trustees to reconsider them. Trustees can and should back their administration teams to explain scheme rules.

These two categories of inquiry are “needy” and they both point to what the FCA call “vulnerability”. These kind of questions are best dealt with by people who know what they are talking about but they do not generally need financial advice. In an extreme situation, it may be that the inquirer needs medical help, the duty of care to members does not preclude referring the inquirer to a medical service.

3 and 4; the greedy

There are some confident people who believe they can do a better job with the monies allocated to pay a defined benefit than the trustees. These are the people who should be taking financial advice and they may well be those who least want to pay for it. These are precisely the people who are being failed by contingent charging.

I appreciate that many readers will consider me paternalistic or even patronising , but the reason we have trustees is to protect some people from themselves. It’s not just in Port Talbot that contingent charging unlocked the money, hundreds of thousands of people are now sitting on pension wealth unlocked from defined benefit pension schemes – with the money either sitting in cash or in equities and very much at risk of not providing an income for life with any kind of inflation protection.

I also appreciate that for many of those people, replicating the defined benefit income stream was not the point of the transfer and I can accept that some people will be quite comfortable with the depletion of their transfer value by the fall in world markets and the scant interest available to them in 2018.

But I am quite sure that a very large number of the people who transferred out considered the charges levied on their pot by the adviser, the price they paid to get their money, rather than the cost of financial advice. These are the people who we should worry about, for they are the people who consider the payment of advisory fees a kind of insurance policy against which they can claim if things go wrong.

And if things continue to go wrong with their pension policies – or worse still if they have by now transferred the money from their personal pensions into their bank accounts, then the fall in pot value and/or the tax bills on claims, may be the basis of claims to come.

The FT run another story today about the costs of drawing down cash – showing it is hard to have your money managed in an advised way for less than 2% pa.

It is hard to see how a  drawdown strategy costing 2% pa can deliver value for that money in a low-interest, low-return economic environment. Yet this is precisely what many of the personal pensions set up under contingent charging are costing and – even if markets do pick up – the cashflow projections which underpinned many of the transfer approvals I have read, have little or no chance of being met.

If the reason for transfer is that someone is backing themselves to beat the trustees, then that person should be testing that with a financial advisor and paying up front for that advice. The argument that contingent charging is more tax-effecient and maintains liquidity for the client are pure sophistry. If someone is so good with money that they can manage their pension themselves, they should have plenty of liquidity and should know that VAT is charged on professional services. IFAs who think they can avoid charging VAT by charging advice to their fund clearly do not believe they are offering a professional service.

5 and 6; the numpties

There are some people who are neither needy or greedy, they are just financial numpties. These people should not be taking financial advice, they should be taking their pension.

People who take transfer values and then cash in their pensions so they can have money in their bank accounts are numpties.

People who get persuaded to take transfers by financial advisers or friends or family are behaving like numpties. They are generally following the crowd, they are not thinking for themselves – they are neither needy or greedy – they are just being stupid.

I could have told many of the people I met in Port Talbot they were behaving like numpties and in fact Al and I did – when we heard some of the reasons given for transferring – including the arguments that they didn’t want their money with TATA, we told people straight not to be so stupid.

These people did not need to have a financial adviser do cashflow planning for them, they needed to transfer into new BSPS or occasssionally take a reduced pension from the PPF.

To be fair to the Trustees of BSPS, they had set up help for these people, but it was like building the Maginot line- the defences were in the wrong place.

Any pre-advice service needs to identify financial muppets and tell them to leave well alone.

We try to be too tender – people need telling

Amidst all the hand-wringing of the past 12 months, I have heard very little straight talking about transfers.

Hopefully you have read some straight talking on this blog and if you don’t agree with me, you can straight talk to that effect in the comments box.

I don’t agree with Phil Young who blames the transfer debacle on freedom and choice,  

I don’t agree with Quilter and SJP that contingent charging should remain to broaden the range of people who can get advice.

If there was a policy mistake, it was from the Fowler review in 1987 which allowed transfers out of DB plans in the first place. As for vertically-integrated provider arguments about financial inclusion, some of the people who are targeted for DB transfers would never have passed their IFA’s sniff-test, had they not had a big fat CETV.

These are bogus arguments that perpetuate the misery that is being occasioned by transfers out of DB schemes using contingently charged advice.

The pensions given up by steelworkers and many others were designed to provide them with a wage in retirement and a residual spouse’s pension. They also gave people the option of tax-free cash. They were entirely suitable for most people’s later life needs and they have been swapped for wealth management schemes about which most of these “new to advice”, contingently charged people – have no idea.

The people who need telling this are the FCA and TPR who are supposed to regulate advisers and trustees respectively. I tried to tell the Trustees and Advisers of BSPS but they didn’t listen. I am still trying to tell it straight

Contingently charged advice is little more than commission and should be banned immediately.


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

Pension Transfers need planning permission.


cumbo cetv

Jo Cumbo

In an important contribution to the debate on how members of DB plans can pay for advice on whether to transfer out, the FT’s Jo Cumbo calls for the financial advice bill – regardless of whether the answer is “yes” or “no”, to be paid by the DB scheme.

The suggestion is very helpful;  this practice is already in place for individuals to pay tax bills arising from stealth taxes on pension accrual where individuals inadvertently breach annual allowances. Schemes are getting used to docking pensions for divorce settlements and the administrative processes needed to administer the advice payments are already in place.

Royal London’s Steve Webb has now come in alongside this suggestion.

Indeed – but if contingent charging was banned we’ve also suggested in our submission that the impact could be mitigated by allowing advice costs to be debited against DB rights, in line with your column this week in @pensions_expert

— Steve Webb (@stevewebb1) February 7, 2019

This is a rare example in pensions of a news reporter making the news!

The ironies of over-information

Most of the time, prospective pensioners walk into life-changing financial decisions surrounding their defined benefit pension schemes with little or no knowledge of the decisions they are taking. An example being the taking of tax-free cash, which is now so much the default that actuaries assume it will happen in scheme funding calculations.

Many schemes are offering commutation factors that can only be justified by the tax-free outcomes, means that schemes are getting away with poor exchange rates between cash and pension – because people don’t know the questions to ask.

So it’s ironic that the conversion factors surrounding a CETV are accorded so much scrutiny that such a cumbersome vehicle as scheme pays – is actively considered.

The reason it is, is that large parts of the DB pension system are now so fragile that they risk being eroded and falling like cliffs into DC. It needs to be pointed out that there appear to be no losers in such erosion, the advisers are making money, providers are making money and pension schemes are clearing swathes of risk from corporate balance sheets. As with most “win-win-wins”, the dictum we should be reminding ourselves of is..

“If it looks too good to be true – is probably is”.

Case study – me!

When I was 55 , I looked at taking my defined benefit as a transfer to a DC scheme. I was allowed a free transfer quote, prepared at some expense to the scheme by scheme actuaries and administrators. I looked at my CETV and was able to assess whether I would be getting value for the money on offer. I gave myself advice (which I was entitled to) and did not take the money. It wasn’t hard to see that there was a good case at the time for taking the transfer , but I didn’t.

  1. I didn’t trust myself to manage the money successfully
  2. I didn’t trust anyone else!
  3. I didn’t want to be worrying about the markets and the impact on my pension
  4. I had confidence that as a pensioner, I would get my pension paid as long as I was on the planet – and that my partner would get a residual pension too.

Because I did not pay to come to these conclusions , I saved myself around £10,000 (+vat) in advisory fees or a nasty litigious time with an IFA – if I had turned down a recommendation  to transfer on a contingent charge.

I will of course have to live with my decision to get paid a pension rather than take cash, but I am sanguine about that.

If I had taken advice and had a £10,000 charge against my pension, I would have around £25 pm docked from my pension (increasing by RPI each year) for maybe 50 years.

The consequences of eroding pensions by fractional deductions through scheme pays are every bit as serious to my long-term finances as the payment up front. I imagine that in a scheme pays, the VAT I paid would be un-recoverable ( 20% of the £10,000 I was quoted).

The danger of scheme pays

The numbers above are sobering. £10,000 paid to an adviser from a scheme or from the client’s bank account is still £10,000 and that £25 pm is the equivalent of £10,000 whichever way you cut the cake.

It is effectively paying for advice on the never-never – a kind of Hire Purchase agreement of which PPI is the latest incarnation.

The danger of this approach is that it is presented to clients as so painless as to be a “no-brainer”.

“what’s the worst that can happen, I say “no” and you’re out a fiver a week?”

If a fiver a week’s the downside and the upside is half a million pounds of accessible capital, the temptation to take unnecessary advice is obvious.

Unnecessary financial advice

I don’t think you’ll find the phrase “unnecessary financial advice” in the FCA’s COBS rulebook, you certainly won’t see it as a risk in any advisory literature. The received wisdom is that regulated financial advice is necessary.

But in my case study, I firmly believe that I did not need advice about taking my transfer, all the decision points listed above were decided upon by my emotional response to the prospect of having to manage my own money.

Most people, when presented with the stark reality that now faces people who’ve transferred, is that they would have been better off in their schemes being paid a scheme pension for the rest of their days.

They didn’t need to be charged thousands of pounds to be told that. So for most people, the scheme pays route is a total red-herring and good advisers will not lead people down that route.

The danger is that less good advisers will find the each way bet of being paid by the scheme or out of the transfer value, a bet they cannot lose. The poor adviser will be able to lean on the victimless charge argument to provide unnecessary financial advice – as damaging an insurance policy as PPI – and equally useless.

Scheme pays requires full disclosure

If we are to have a non-contingent charge transfer advisory payment based on scheme pays, it must be made crystal clear by the trustees that they will be sending the client’s adviser an amount in pounds shillings and pence terms. Trustees must also make it clear that the deduction from someone’s pension as a result of this is likely to cost the member that same amount – in today’s terms and is simply the same bill expressed another way.

Advisers who work on such a system would need to be equally clear about the impact of scheme pays.

I remain to be convinced that a system of scheme pays would stop unnecessary advice. I think we need more, applying for a transfer should be like applying for planning permission on a house.

Planning permission

I stick with  previous comments in precious blogs; that this kind of advice – advice that is paid for on the never-never, should only be entered into where there is a clear reason why a prospective client might be better off not taking the scheme pension.

My argument is that the onus should be on the adviser to prove that there is a case for the client to be asking the question about transferring in the first place.

Taking a planning decision like this should be as serious a decision as applying for planning permission on a house

The submission of that case for clearance – should be something that should be carefully considered by the adviser. It should not be a cost-free process. As with a house- planning application – it should be submitted with the risk of failure being obvious upfront.


cumbo cetv2

The advisory diagnosis may not always be what was hoped for,


Posted in pensions | 5 Comments

“Why pensions might just change your life”.


This morning I’m travelling north east to Newcastle on the first train up. I’ll be delivering the graveyard slot for my friend Carsten Staehr at the Cintra Conference.

The people I’ll be talking with don’t like pensions, Carsten’s title is provocative. For the payroll and reward people who are Cintra’s clients, pensions are a pain in the neck, the most incredible mess of rules which they struggle to comply with, always worrying about fines and worse – being dished out by a distant pension’s regulator.

I guess my job is to breathe into their day something of the enthusiasm I have for helping people manage their financial affairs so they have a decent wage before and in retirement.

If pensions are supposed to help you stop work, people should be enthusiastic about them. But “thank God I’ve got a decent pension”, is a phrase seldom heard either in or outside the pension bubble that I live in.

If you get to a point in your life when you find that because you have the money, you can stop work, then your pension has changed your life – no doubt about it. And millions of ordinary people are retired today on good pensions with the prospect of an income ahead of them that lasts as long as they do.

I think we take this for granted. But it is an economic miracle that we have created a safety net for so many through the national insurance system and through workplace pensions.

Yesterday evening I sat with some great pensions people variously representing Local Government Pension Schemes, Corporate defined benefit schemes and the new style DC savings plans. It became clear early in our discussion that this meeting was going to be fruitful and that we would agree a common agenda for a conference being planned for May.

What brought us together was the phrase “better pension outcomes” which is all that we focussed on for nearly two hours. Whether we were looking for greater efficiencies for Local Government Pension Schemes , or improving the certainty of the full pay-out of corporate DB or helping people with the business of turning the pot into an income for life- we were joined together by a strong sense of purpose.

This purpose was made the more real as the people around the table clearly felt they had the power to change lives in a positive way.

I’ll be the first to admit that pensions are to most people “scary” almost unbearably complicated and an aspect of their finances that is best consigned to the bottom drawer to be properly opened late in life, People know damned well that pensions are very important and they feel guilty that they don’t feel better informed about their retirement planning.

This is the challenge that I face today, I will be talking to a group of people who see pensions – both personally and work-wise, as extremely hard work. My job is to make them easier, simpler and less scary.

I can only do this by approaching my talk with a positive state of mind. After the conference, I am having supper with two smart academics who appear baffled by their own circumstances. They told me their retirement problems and I blurted out “that seems simple enough”. I can see the wood – they can only see trees!

Like the people in the conference, my friends are looking for encouragement to do what they want (I assume to find a way to stop or cut down on work and rely more on pensions and retirement savings.

They, like most people I know (professionally and socially), feel embarrassed about asking simple questions about how they can get their money back to meet their financial needs. It is fantastic to be able to help them get better pension outcomes.

Pensions have undoubtedly made my career, last night I really got what my vocation has become and I look forward to my talk this afternoon and supper because I’ll be doing what I love.

I hope that some of the people I’ll be meeting today, will read this blog and say – yes – Henry really does enjoy helping people get better pensions. That is why I am travelling to Newcastle for the day and why I’m happy to!

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Come join the party – the AgeWage video!

I think AgeWage the most exciting thing I’ve done in my working life!

Watch our video and see if you agree!

Posted in pensions | 2 Comments

Not all recycling’s in the public interest!

recycling 2

Pensioners recycling

A lot of people are confused about taking money out of their pensions and the pensions industry isn’t being very helpful in encouraging people to have their money back (funny that!).

So when I read a headline in the Financial Times announcingUK pension freedoms open huge tax trap for over 55’s I smelled more scare tactics from those who would rather we kept money with them than spend it on ourselves – I was right.
The tax trap in question has “caught” 980,000 over-55s who took advantage of new pension spending freedoms between 2015 and 2018, with an irreversible reduction in their annual pension tax relief allowance from £40,000 to £4,000.

In practice, very few people who are drawing down money from their pension will be saving more than £4,000 pa and you would expect that most who do – will be accessing tax advice. This is a rich man’s problem and is almost certainly dwarfed by the amounts in unclaimed tax-relief that higher rate taxpayers miss out on when contributing to personal pensions.

I was pleased to see the comments below the article were generally robust. This is typical

This is boring nanny state speak. If you are able to invest £40k but unable to figure out the implications without the help of financial advisers then time to go peacefully to higher planes in the company of grim reaper with a scythe.

Putting this problem in some context

Generally speaking, people who are investing into pensions while drawing money from pensions are doing so as a tax arbitrage and not as an insurance against old age.

Nonetheless, it is important that people who do have pension pots and are over 55 are aware that the annual allowance that they have (normally £40,000) is reduced if people are found to be recycling money they are drawing from a pension back into a pension.

As soon as you start drawing more than the tax free cash available from your pension pot, you are seen to be “recycling”.  Sometimes this recycling has  value as in this idea from Debt Camel

pension recycling

But the reason that recycling is restricted is that for the most part it serves no social purposes other than to make the rich richer.  I doubt that many of Debt Camel’s customers are worried about losing the capacity to pay £40k per annum into their pension!

We currently have over a million people missing out on their promised retirement savings incentives because of the net-pay anomaly. Let’s get back to questions of social justice.

Arguing over the annual allowance misses the bigger point

That people are not aware of the technical issues around recycling is not the big issue. What is much more important is that many people are confused about whether they can start taking their pension when they are still at work.

The simple answer is that they can and that apart from the fact that the pension may be subject to a higher rate of tax than salary, there really isn’t any reason why someone over 55 shouldn’t have access to their money.

Indeed, many employers are keen to promote the freedoms people have , so that their mature workers can give themselves options which may include part time working, consultancy or early retirement.

What is surprising is that employers who are keen to offer flexible working practices, are paying so little attention to the opportunities their staff have to structure their exit from the workplace using the retirement savings plans that these very employers have sponsored.

The use of pensions for the over 55’s is perhaps one of the least understood areas of reward strategy and it doesn’t require employers to spend a lot to get right. We recommend that employers work with their staff’s financial advisers or provide financial advisers for staff to use. There are opportunities for advisers to be paid by employers without that payment being deemed a benefit in kind.

If the budget permits, an employer can commission pension consultants to provide a program of seminars and one on ones with employees in the retirement zone (effectively anyone over 50).

An alternative strategy may be to empower those in reward to become pension champions themselves. Learning the pension ropes may appear daunting, but there are plenty of training courses that can help. The Pensions Management Institute are particularly helpful as are the CIPP and the Learn Centre.

First Actuarial, like most pension consultancies, operates a program for the over fifties. We call it  “saving enough to stop work” and it runs at big companies such as Unilever. We are encouraging staff to create their own pension dashboards where they can see all their in retirement financial resources on a single screen. Even if this is no more than a spreadsheet word table or even a hand written list, the creation of a personal balance sheet and cash flow forecast is not as hard as it sounds!

Most people are frightened by pensions, but in our opinion, this fear is increased by the scaremongers within the pensions industry who would rather have us hang on to our money, than see it spent on retirement.

saving enough to stop work.PNG

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

Al Rush has made the difference

Al rush new face

Al Rush


I’m surprised , a little freaked out – to be on a list of candidates for Professional Adviser’s personality of the year.

You can vote for me, but I’d rather you didn’t. I’d rather you voted for Al Rush who is not just a personality but a personal hero!

And the main reason I’ve got anything to be proud of -is because that lad drove me down to South Wales a couple of Novembers ago!

Here’s something that I got on Facebook messenger that means more than winning any award. It makes being a blogger worthwhile. I won’t embarrass the sender , but if he wants to reveal himself, he can comment below!

Good evening Henry , I’ve just seen that you liked my post on FB.

The fact is, I should tell you that your blogs , and appearance at the parliamentary committee , has helped me enormously..

I’m still not out of the woods , but I just wish I’d have had your advice a couple of years ago . I equipped myself with some print offs from said blogs(apologies if there is any copyright infringement 🙂 ) , and went to an IFA and was armored, protected empowered and that so , I’m eternally at your debt for . Kind regards….


Thanks for making my weekend!

Putting things in perspective

I know that some of my blogs are controversial and some have just proved me wrong. But with well over one million reads, I’d like to think that people get value from what I’m saying.

So this is what I am saying

Blogs may make a little difference but Al has made all the difference!


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

Paperless pensions are nearly here!

Someone said something great about me last night. It was Kevin O’Boyle, retiring head of BT Pensions. He introduced me to a millenial as “Henry Tapper” the only person my age who thinks like a millenial”.

It’s a hell of a compliment and one of an exaggeration but I do think about younger people a lot.

One of the things I’m thinking more and more is that we must start our conversations with people who are saving and spending their pensions – digitally. If you can see an invitation to like AgeWage Ltd at the top of this page, you should also see that quite a lot of people are liking it.

My guess is that what people like is not the detail of what AgeWage does but the fact that we’re  trying to talk about difficult things using tools that people like to use.

Let’s go paperless

To my great relief, First Actuarial’s payslips went paperless last year. You had to opt in to a printed payslip , which meant being near a printer. I don’t have a printer and can’t be arsed to file paper anyway, I can see any of my payslips on a file that I have a password to – sorted.

So why is it that I get my pension statements from the people I’m saving with and the pension scheme that pays me each month – in paper?

Every time I get a statement, I sigh. If L&G sent me a mail or a message with a link, I’d be able to see what I want to see on a screen. I’d be able to click through if I wanted more detail, I’d be able to hook the information up to MoneyBox or MoneyHub or to my pension dashboard. But no – I get a piece of paper without so much as a QR-code

It’s not just statements that need to be simple

We think that digital is complex, and to those who do not understand digital it is. But to consumers, a digital pension statement can be the easiest thing in the world. it can contain a video telling you how to read it, it can contain links to apps that can explain more , every data item can be clicked through to give more information.

In short, a digital statement simplifies the way we can absorb complex information so that users get to understand things the way they want.

I am not saying that people can’t request a paper statement, but the last piece of paper should get automatically should tell them that unless they ring a certain number, everything they get going forward will be paperless.

It’s not just payslips, it’s tax returns and insurance claims and smart-phone bills. We should make it our earnest aim to make the postbox a thing of the past. Digital can simplify our lives.

So what of simple pension statements?

The work that Ruston Smith, Quietroom and others have done on simplifying pension statements is quite excellent. I hope Ruston has taken heart from the call of the FCA for charges on drawdown to be explained in pounds shilling and pence terms.

The original project was stymied by a move from certain parties not to tell us what we had paid for our pensions on pension statements, – apparently a till receipt is too complicated.

Of course a till receipt isn’t complicated though people do need to have it explained to them from time to time – it’s good that people do question till receipts – sometimes they show errors – the process is called engagement and that’s exactly what we’re supposed to be encouraging people to give us.

If a simple pension statement was delivered digitally, the till receipt could be clicked through from the “this is how much your pension cost last year” button. If people wanted to query each item, then they could click on it. If the provider of the statement was a bit advanced, it could develop a bot to answer questions, they could even provide live chat within certain time constraints. Questions could be answered by fifteen second videos, the customer could be educated in a single visit to the statement.

Moving beyond simple statements

A great deal of time is being spent on making digital experiences good ones. My phone is full of apps which I use because they make life easy – apps like MoneyHub and MoneyBox challenge me to see my finances in a new and better way. They make a difference to my day to day living. I don’t pay £2.70 for a Cappucino any more, I pay £3 – 30 p of which goes to an ETF which I will cash in a couple of years for a few hundred pounds.

Similarly, if I want to find out not just the value of my pension pots , but how they’ve done, I’ll be able to use the AgeWage app. I’ll be able to ask it how responsibly my investment managers have behaved, what my options are going forward and most importantly – how I can get my hands on my money!

Simple statements can incorporate an AgeWage score and a click-through from the score does all the rest.

Pensions needs to bootstrap themselves into the digital economy.

We talk about pension communications from the perspective of a world that is no longer there. People have moved on, pensions hasn’t.  Paper statements are not part of the world I live in.

Believing that we have done enough to simplify pension statements is to allow ourselves to be blind-sided by the past.

Believing that we can get away by posting performance charts on websites as part of statutory disclosures is to totally miss the point. The information we post about the money we manage for others must be delivered on their terms and not ours.

We need to be a lot tougher on ourselves, get out of our offices and onto our phones. We need to see things as millennials do. For where millenials lead, the rest of us follow.

This “boot-strapping” is hard, it involves people doing things differently and learning from others. I hope that  that was the compliment Kevin was paying me last night.

I wish Kevin O’Boyle a long and happy retirement – properly funded by his pension

KevinOBoyle happy retirement Kevin

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FCA to tame the drawdown bucking bronco!


broncoYesterday was a good news day for people concerned about retirement income. The FCA made two meaningful statements on what it intends to do to help ordinary people trying to manage their in retirement finances. The first was the publication of PS19-01 and deals with disclosures and the second was  PS19-05 which deals with investment matters.

Investment Pathways

We are seeking feedback from stakeholders on proposals to require drawdown providers to offer non-advised consumers a range of investment solutions – with carefully designed choice options – to help consumers choose investments that broadly meet their objectives. We describe these as ‘investment pathways’.

Ensuring investment in cash is an active choice

We are seeking feedback from stakeholders on proposals to require drawdown providers to ensure that consumers invest in cash only if they make an active decision to do so. We propose that these providers must also give consumers warnings about the likely impact of investing in cash on their long-term income, both when they enter drawdown (or transfer funds already in drawdown into a new product) and on an ongoing basis.

Actual charges information

We are seeking feedback from stakeholders on proposals to require firms to tell customers beginning to draw on their pension how much they had actually paid in charges over the previous year, in pounds and pence and inclusive of transaction costs.

The investment paper  , which may become rather more important ,  also concerns the role of IGCs in regulating the wild west of “post retirement strategies”.

A financial bucking bronco.

The best image to explain the current state of affairs for people trying to draw an income from their savings is the bucking bronco.

You get on the beast with no instruction manual and you ride it till it throws you off. Each time you get thrown off you do serious damages to your finances- till in the end you do serious damage to yourself.

How else to describe investments into funds whose overall charge is in excess of 2% pa , where the tenable drawdown rate (gross of charges) is no more than 5%?

How else to describe the dangers of sequential risk through individual investment into volatile funds that can trade – intra day by as much as 10%?

How else to describe the impact of advisory charges which can add 1% + to Discretionary Fund Management Agreements already costing the said 2%+.

Why the proposed extension of scope of IGCs matters

The original scope of IGCs was to oversee workplace pensions. IGCs were given a second task which was to see through the recommendations of the IPB on legacy charging.

In CP19-5 the FCA state that

After careful consideration, we still intend to extend the IGC regime to cover investment pathways.

Many of the larger providers who will offer investment pathways already have IGCs to provide independent oversight of the value for money of workplace personal pensions.

These larger firms will account for most consumers in investment pathways.

As an alternative to IGCs, we already permit Governance Advisory Arrangements (GAAs) for smaller and less complex workplace personal pension schemes. We intend to allow GAAs for providers with smaller numbers of non-advised consumers in investment pathways. We are considering further a proportionate approach for providers with smaller numbers of non-advised consumers.

Providers will not need to provide investment pathways if they require that all their consumers take advice before entering drawdown.

We intend to consult on our proposals for independent governance of investment pathways in a future consultation on IGCs, due for publication in April. This will include a more detailed response to the feedback. Our planned consultation will also include proposed new rules requiring IGCs to report on firms’ policies on environmental, social and governance considerations, member concerns, and stewardship, for the products IGCs have oversight for.

The FCA are also looking into employing IGCs and GAAs to oversee non-advised drawdown from non-workplace pensions.

Right now, the IGCs are relatively under-employed and looking for new work. The biggest area of concern to the FCA is the under-regulated in retirement market where there are no charge caps and little oversite as to whether insurance and SIPP providers products are being used in the interests of clients.

Some of our most powerful insurers and SIPP providers – most notably St James’ Place, do not even have an IGC. They are allowed to get by using a GAA – which is a bite-sized IGCs with bite-sized budgets and influence.

Extending the scope of IGCs and GAAs would seriously strengthen the IGC’s remit to cover the wild west and help tame the bucking bronco.

It seems that IGCs will not be used to assess the value for money of advisory fees – indeed the direction of travel (which will be better flagged in April) – suggests that IGCs and GAAs could have a remit to cover all non-advised drawdown. But the paper does mention that the IGCs and GAAs may be asked to oversee drawdown from non-workplace pensions. I think they should – there is precious little else to protect the 94% of the population who do not pay for financial advice.

Since the majority of the issues that negatively impact people’s drawdown strategies derive from over-charging within the product, the use of inappropriate funds and the lack of value for money from adviser charges, the job of oversite should play to IGC’s strengths.

Taming the drawdown bucking bronco

The proposals in the two documents published yesterday are worthwhile. There has been disappointment published by the Work and Pensions Select Committee and by Which that the charge cap has not been extended into post retirement products but I don’t share the view that it should be.

We need a more fundamental approach to fiduciary care than the blunt instrument of a charge cap.

I would prefer to see the IGCs and GAAs and the FCA test the value people get for the money they pay to be on that bucking bronco. If it can be proven that people can be taught to ride it and ride it as experts, then there is value. But the cost of advice cannot be so great as to ruin the ride.

If the FCA, IGCs and GAAs cannot bring the costs of drawdown down, then we may have to resort to a cap in the final resort; but the cap should be the long stop, not the wicket-keeper.

If people are left to their own devices, the measures that are proposed – the investment proposals – need to be shown to work. I do not see how these measures can provide the protection people need to get the kind of wage in retirement most people expect.

For that people will need a different kind of product, a collective product such as an annuity or CDC. These products carry different risks but – I suspect – risks that people will find easier to deal with.

The bucking bronco may be fun for a party, but it’s not what you  ride into retirement on,

Posted in advice gap, corporate governance, FCA, pensions | Tagged , , , , , , , , , | 5 Comments

The “annuity puzzle” and how to solve it.


Have you noticed how TV drama focusses on dying? We’re obsessed with death. Statistically the county of Midsomer should be totally depopulated by 2050, such is the carnage wrought on its citizens. We mark each celebrity , friend who dies. Our news broadcast focus on the loss of life. Our obsession with our ending overshadows the fact that we are still living and most of us are showing no sign of dying.

We spend time in the gym, we walk the hills , we diet and we avoid toxins to avoid death. Yet we still bet on our dying sooner than later.

This fact is we do not want to insure against old age because old age is not in our imagination. Everything we are doing in this massive attempt to stay young, is in denial that we will grow old.

I am not surprised by the findings of the IFS. Paul Lewis comments

He is partly right, but the propaganda is populist, there is a pre-existing bias in our psyche towards nostalgia and we yearn for youth rather than preparing for the future.

Death is so much more glamorous than living long. Death doesn’t just sell TV drama, it stalks our imagination, a real foe against whom we fight to be rewarded with the one thing we have no plan for – a long older life! This is so curious. It is what the Institute of Fiscal Studies calls “the annuity puzzle“.

A conspiracy against annuities?

Picking up Paul’s theme about “propaganda”, and continuing my musing on murder mysteries, I’m looking for a motive.

Why has everyone from George Osborne to the Wealth Management Industry got it in for annuities?

Research from the mid nineties on (Orzag + Orzag +Mehta) shows that annuities purchased in the UK are value for money products. They are well priced , there is a competitive market and for the certainty they offer, they provide a decent income in exchange for the capital used to purchase them. The research consistently shows that annuity providers are not ripping off their customers.

When George Osborne said that nobody need ever buy an annuity again, he raised the roof of the house of commons, we all dislike a product the point of which is to fund the part of our life we don’t want to think about.  But the product is sound, it does what it says on the tin. I wrote recently about work Legal and General have done on annuities which shows again that the problem is not with annuities, but with people’s failure to engage with the reality of the future.

I think that this unstated bias against protecting ourselves against old age is built in to much of the objections to CDC. If only 12% of us are purchasing an annuity with any of the money we have at retirement, why should 100% of us choose to club together and insure ourselves against living too long? Do we want longevity protection – 88% of us clearly don’t see this as a priority.

Do we need longevity protection? Well we are likely to hear within the next few weeks more bad news about the state of long-term healthcare and the vital need for us to do some planning to afford the implications of a long demise.

If our answer to this problem is to blow our pension pots in our sixties and seventies, then DC is presenting the next generation with a massive problem. The moral hazard is obvious, we are presenting our children with a long-term care bill that can only be met from their inheritance or for a levy on the wages of those still working. Either way our children will have to pay for our healthcare – unless we make provision today.

Mortality pooling prevents inter-generational transfers.

My conclusion is that ordinary people cannot afford annuities any more than ordinary private companies can afford Defined Benefit pensions. The cost of guaranteeing the future is too great, a lower level of certainty must be admitted or people give up altogether.

The lower level of certainty I am thinking of, is of course the unguaranteed wage for life offered by a properly managed CDC plan.

If we cannot afford “proper” pensions , we cannot afford not to insure against old age either. The annuity puzzle presents this paradox but no answer.

CDC presents an answer, albeit one that depends on a belief that over time – maintaining the funding of unguaranteed pensions depends on investing in growth assets rather bonds, keeping admin and investment costs down through economies of scale and ensuring that new people arrive into the retirement pool to replace those dropping off the perch.

This is what Royal Mail are doing with a pool of around 140,000 postal workers. It is a noble experiment that will need to be emulated by other organisations if we are to call CDC anything more than an experiment.

Without such an experiment, I see little chance of individuals changing their behaviours much, people will continue to vote against annuities nine to one and we will have as a nation no plan as to how to spend the massive sums we are saving into DC workplace pensions.





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People’s pots

Gregg mc

Gregg McClymont- a man of the People

Nigel Mills asks the right question, but it is not for Gregg McClymont or People’s pension to answer. This question needs to be aimed squarely at the Department of Work and Pensions and its Pensions Regulator.

We are now six and a half years into auto-enrolment. Ten million new savers have been included in the second “workplace” pillar of pensions. The vast majority of them can now say that they “have a pension”, though what they mean by that , I doubt many could explain.

As for People’s Pension, the 4m pots that they manage will be unlikely to turn into pensions – in the sense that most people understand “pension”. They are unlikely to turn into a “wage in retirement”, the pots will simply augment other sources of savings, albeit in a tax-advantaged way.

People’s have done exactly the job they have been asked to do.

It should be noted that the 4m people who have pension pots with People’s pension, are paying a very low amount for the management of their money (only 0.5% of the amount in the pot each year). Many  of the employers that People’s provide workplace pensions for, engaged with People’s at no cost and those that are now paying to sign up are paying a low amount.

People’s has had no Government loan yet it has been competing with NEST that yesterday announced another loan from the tax-payer, this time for NEST to meet its obligations under the Mastertrust Authorisation regulations.

People’s do not have this backstop, while NEST can boast they are well on their way to self-sufficiency, they will have got there with the help of up to £1.2 billion of our money lent to them on non-commercial terms.

It is in this context that the Work and Pensions Select Committee should consider statements to employers on People’s websites.

People’s are the real deal.

Employers value their staff, they are pleased to run pensions for their staff – but as I know from running Pension Play Pen since 2013, employers do not feel they have an obligation to provide better pensions, they have an obligation to comply with the rules, to stay solvent and to reward shareholders but they are not obliged to become pension experts.

Actually, those employers who contract with People’s Pension are probably already going the extra mile, People’s has regularly featured in the top three workplace pensions in Pension PlayPen ratings and – in terms of useability for employers – it is right at the top. Not even with all the money spent on it, has NEST bettered the People’s inter-operability ratings for company and multi-company payrolls.

A genuine not-for-profit

As Gregg McClymont likes to remind me, People’s are a not-for -profit organisation and do not have a shareholder to reward. They share this with Royal London and several other smaller master-trusts.

It does make a difference, not just in terms of the commercials, but in terms of the care that the organisation can focus on individual members. In my experience (and Pension PlayPen’s, People’s Pension have done the right thing for members, they have not fallen into the net-pay trap, they offer good member support and they are working towards a more sustainable investment default with the help of the relatively new CIO – Nico Aspinall.

People’s Pension should be getting a round of applause from W&P Select for achieving all this with no soft-loans and in the teeth of competition with a Government backed organisation that operates with the tax-payer’s safety net sitting below it.

It’s a commercial not-for -profit and like its parent B&CE – it always has been


Time to put the member first?

It’s clear that People’s are beginning to think about the peculiarities of being seen as a pension provider, without actually providing pensions. People’s don’t offer an annuity, nor does B&CE (the life insurer).

As their membership matures, helping those members to spend their money will become an increasing feature of what Peoples Pension does. It is not a wealth preservation outfit, the majority of its savers will need at the very least a top up to the state pension, at best a proper wage in retirement paid from their People’s Pot.

This will mean, at some stage, getting those 4m odd savers to take decisions. Decisions such as whether they use People’s or some other pension scheme as their big pot. People will have to have a basis to decide to move money to or from People’s pension and they will do so on the basis of their perception of who has done best for them in the past and who is likely to do best for them in the future.

That value for money estimation is not something that most people are prepared for. The decisions that lie ahead of the 4m employees who Nigel Mills is thinking about are hard and right now there is precious little advice to go round.

People’s pots

So far, to survive as a commercial not-for- profit, People’s have had to focus on the needs of their employers and not on member support.

But that strategy has to – and I’m sure – will – change.

I expect that if W&P Select to ask that question of People’s Pension in another six years, they\d get a very different answer.

Gregg bighair

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The Rookes report is a fine piece of work but actions speak louder than words.


Having read Caroline Rookes’ review of the regulator’s handling of the BSPS “Time to Choose” episode , I’m  satisfied that she’s sending the right messages to the various authorities involved.

There are four authorities who have their say in the report’s press release. They include the soon to be defunct TPAS, the SFGB which is taking on TPAS’ responsibilities, the FCA and the Pensions Regulator. Lurking in the shadows are the Treasury and DWP who jointly fund these regulators and guidance agencies. To the list we could add FSCS , FOS and the Pensions Ombudsman.

This is a report from a civil servant to civil servants and it generally hits its mark.

The headlines will be about the provision of advice

Perhaps the most powerful statement by anyone involved in the Port Talbot scams was how one steel man followed the advice from the Money Advice Service to the letter and was referred to Darren Reynolds of Active Wealth (via Unbiased). As Rooks says- Unbiased isn’t unbiased and the  circle that led the FCA and MAS to point steel men to their nemesis shows just how “due process” can destroy confidence.

We all know how the bottom feeders like Active Wealth behaved, it’s been a matter of public record since the inquiry carried out by Frank Field and his Select Committee.

But there is another advisor that Rooks has stopped short of naming, who should be mentioned in this. That advisor was paid by the Trustees of BSPS to prepare its membership for the Time to Choose and the report stops short of naming it.

But everything in the report suggests that the opportunity to avert the problems of Port Talbot and elsewhere  was missed because of the failure of the Trustees to put in place the basic support that members needed when they considered their options. The support that was needed and not supplied was the provision of a transfer helpline and on the ground help to members struggling to understand the implication of unlocking the transfer treasure chest.

The headline about advice should not be about the failings of Active Wealth, but about the failings of the Trustees to prepare their members for Time to Choose.

The complacency of the Trustee’s advisors was pointed out to Caroline Rookes by me and I will continue to argue that it is the support mechanism that failed the Trustees – not the Trustees’ judgement.

In my opinion , professional consultants- whether working for the employer or trustees, have become complicit in the transfer frenzy that hit Britain in 2017 and the first part of 2018. It is hardly surprising. Senior consultants were often busy transferring out their own DB CETVs on highly advantageous terms. The prevailing opinion in the press was summed up by Merryn Somerset-Webb who told her readership in the FT that if she had a DB benefit – she’d transfer it.

Until Port Talbot, DB transfers were perceived as the prerogative of the wealthy and not something that the working man could indulge in.

Contingent Charging and the part it played

Oddly, the report barely mentions contingent charging and the part it played in the transfer of nearly 20% of the deferred BSPS members to personal pensions. It would have been a useful contribution to the W&P Select’s call for evidence, if the Rookes’ review could have estimated what percentage of CETV’s taken, resulted from advice offered on a “no transfer – no fee” basis.

My guess would be way over 90% of the 8000 transfers made.

We can only guess at what percentage of transfer reports would have been commissioned if they had been commissioned on a non-contingent basis. Those reports would have had to have been paid for out of taxed savings and not out of a tax-exempt fund, they’d have been subject to VAT and most importantly of all, they’d have been paid for in cash from a bank account owned by the transferor.

It may be contentious , but the questions surrounding contingent charging are too important to be ignored. It is a shame that the report cannot be explicit on this matter.

It’s good to see Al Rush and Chive recognised

One of the very best things to have come out of the BSPS saga has been Chive- the affiliation of pension transfer specialists committed to raising the game of advice in this area.

The report explicitly mentions Al several times which is absolutely right. When the world watched, Al took action and brought the fate of the steel men to the public’s attention. Jo Cumbo must also be praised for seeing what was going on and taking the initiative.

I doubt that there will be another BSPS and to a large degree that is down to Al and those like him who insisted on fair play for steel men who were vulnerable to the point where most should have been deemed unsuitable for taking on the burden of managing their own money. I saw at first hand Al tell people he knew they had done the wrong thing. That takes a lot of courage- but courage has never been Al’s short suit.

A fine piece of work but…

As Paul Lewis would say “the report is delivered to the resounding thud of stable doors shutting”. It is nearly two years since the RAA was agreed, 18months since the action plan for communicating to members was finalised and over a year since the end of the Time to Choose.

The big elephants remain in the room and they continue to stink the room out. Pension consultants continue to consider transfers as meretricious to a scheme’s funding position and tacitly comply with the culture that has seen over £50 billion transfer out of DB schemes in the past two years.

Financial advisers continue to argue for the practice of contingent charging (with a few honourable exceptions). The only thing that is curbing transfers at present is the price of Professional Indemnity Insurance.

The soft measures put forward by Caroline Rookes are good measures, but they need to be accompanied by tough action by the regulators. Pension Consultants advising trustees must be proactive in organising proper advice be in place from proper advisers – the report points to Chive as a way forward.

Financial advisers need to be protected from themselves. Contingent charging should be the exception not the rule. The SFGB , if it is to play a part in all this, should e commissioned to set up a review board where cases of financial hardship preventing the payment of upfront fees, can be reviewed. It would help if advisers putting such cases forward should underwrite the process on a pro-bono basis. That would ensure that cases of hardship were limited and nobody tried it on.

Action speaks louder than words

The comments from regulators that accompany the press release are longer than the press release. It would seem that regulators are falling over themselves to be involve after the fact.

All these words cannot hide the fact that the Regulators had to be woken up by Al, Jo, Frank Field and others.

Now we hear that these multiple regulators and the guidance bodies and the Government departments are working together. But the fundamental problems around advice remain unsolved – and unaddressed.

The finger of blame points at certain consultancies and IFA firms who have behaved weakly and without due regard to the long-term interests of members. I do not have to mention them, I have done so repeatedly in this blob since I first started writing about BSPS in the spring of 2017.

My words led to my personal actions and I hope that my continued calls for a ban on contingent charging and changes to the way advice is offered to trustees , will be heeded.

Action speaks louder than words.

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Will master trusts go CDC?



We have become a nation of pension savers without a clue what we are saving for

This became apparent to me and I hope the audience of a recent DC event , when a senior representative of NEST told the audience that his 7m members tell him they are saving into a Government pension scheme and expect a Government pension at the end of it

This is not the plan – at least not for now it isn’t. NEST does not pay Government pensions , nor does it pay a pension at all. It is able to return your savings to you in a number of ways – depending on your specification, but none of them include a lifetime income- for that you will have to go buy an annuity.

Last Week, Darren Philp of Smart Pension became the first person from a major master trust to explicitly support the CDC. You can read the article here.

The article stops short of suggesting Smart will go CDC, but that implication is there. The DWP consultation cites the large workplace master trusts as obvious candidates to convert to CDC and it’s not difficult to see why.

NEST has around 7m members, Peoples Pension 4m, Now around 2m and Smart just under 1m. While some people may be members of more than one, that still tots up to well over 10 million people who may well be expecting their pension plan to pay them a pension.

As importantly, these are  10m people who generally do not have financial advisers or the means to do the detailed cashflow modelling to make their money last as long as they do. Not only do these people not have a plan, the trustees don’t have a plan either. To talk of any of these master trusts as “pension plans” is to over sell their utility. Right now they are doing no more than collecting and  investing contributions in a tax free way.

Time to speak

So far, the plans put forward to help people spend their money have either been rejected or ignored. NEST proposed a solution that defaulted people into an annuity when they got too old to do drawdown, People’s have employed LV to provide a similar service, several of the smaller master trusts use the Alliance Bernstein Retirement Bridge, but none of these ideas has caught on, and NEST were told by Government that they could not implement their plan.

So it is time for someone representing the interests of these 10m + savers, to stand up and be counted and I’m glad that it was Darren who did just that.

His article takes the John and Yoko chant “all we are saying..” and asks that CDC be given a chance. No doubt it will, and that won’t be entirely thanks to Smart Pensions. However, the support of Smart Pensions to the CDC debate, shouldn’t be underestimated.

It is time we heard from other master trusts and indeed their trustees.

Is this a business or a trustee decision

Darren spoke as an employee of Smart Pensions. Master trusts are commercial entities (other than NEST which has a business plan to repay the £1,2bn it plans to borrow from the tax-payer.

The critical commercial consideration for all the master trusts is that they hang on to their big pots and lose the small pots. Pot consolidation will undoubtedly come, and will be hastened by the pensions dashboards, the big pots will either result from consolidation or from consistent saving into a single pot. We are years, perhaps decades away from master trusts having the size of pots to make them self-suffecient. For now they are eating money in the expectation that profitable big pots will come.

The critical consideration for master trust trustees, is not so much the profitability of their provider, but the welfare of those who invest with them. It is odd that to date we have not heard anything from the trustees of master trusts about CDC.

Shouldn’t master trustees be involved in the debate, shouldn’t they be sharing their thinking on how they expect their members to spend their savings in retirement and shouldn’t their be a dialogue between provider and trustees on the opportunity presented in the CDC consultation, to upgrade their “pension plan” to CDC in due course?

We save but we don’t know what we’re saving for.

I can understand why both master trust providers and their trustees are keeping their heads down. They are going through the hard work of getting master trust authorisation and are still digesting the massive slug of new business that has arrived through auto-enrolment.

Even the consultancy master trusts set up to consolidate failing individual DC plans have a lot on their plate.

But the deafening silence from the master trust community regarding CDC seems a failure of nerve.

It has been left to a few activists (the Friends of CDC) to write the articles and promote the subject. The master trusts have been silent.

That is until Darren’s article.

I hope that – assuming we get the anticipated pension bill and that CDC legislation forms part of it, more master trusts will have the courage to step forward and enter the debate.

Let’s finish with Darren

I .. think that master trusts could be key delivery vehicles for CDC in the future, especially in helping manage volatility up to, and through retirement. People just want help!


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Let’s get back to those three pillars – promising us certain pensions.

three pillars 2

There are at least three uncomplimentary ways of thinking about “pensions” in the UK . So disparate are these three that it is hard to talk (or blog) about them in the same place.

For a small number of people, pensions remain, what they were supposed to be when the OECD dreamt up their three pillars, a combination of a state floor (keeping everyone from destitution),  a second pillar sponsored by employers which offered up to a two thirds replacement as a wage for life and the option of third pillar private savings.

But this simple and sensible way of thinking about pensions has been seriously undermined – principally by the shift of second pillar pensions to second pillar savings schemes. To begin with, the move from guaranteed pensions (DB) to savings schemes (DC) was dressed up as “giving people the money to buy their own pension” , shortened to “money purchase”. But people grew tired of having to buy a pension with their savings and their frustration led to the pension freedoms, where tax barriers were removed and people could spend their savings as they pleased.

Pensions as a tax-wrapper

Even before the arrival of these “pension freedoms” , increasing numbers of the wealthier in society had cottoned on to pensions as “tax-wrappers” and dispensed with an idea that they would have to have their lifestyle circumscribed by such plebeian phrases as a “wage in retirement”.

The tax  simplification of pensions in 2006 was the spur for this new way of looking at pensions, It meant that people could put 100% of their earnings into a tax-efficient holding pen – equivalent to an offshore trust. It spawned numerous wealth management companies who offered fund platforms and discretionary fund management services.

Since tax-avoidance, rather than retirement provision, was the principal attraction, this new view of pensions was adopted by IFAs who’s traditional business model was turned over by the Retail Distribution Review in 2012. RDR meant that there was now no money in savings plans since they could no longer pay commission. RDR plus changes in tax legislation has totally changed the nature of pensions advice in the retail sector

The launch of universal retirement saving through auto-enrolment

Compulsion on employers offering PAYE to also offer and fund a pension saving scheme has brought 10m new savers to the party. After years of decline (partly due to the failure of DB pensions to adapt to a low interest rate environment), pension savings is on the increase again – through the second pillar. But it is not a very satisfactory sort of saving as it no longer offers the prospect of a wage for life in later years, merely the complexities of pension freedoms – without the wealth or advice.

While auto-enrolment proves to be a success, the ultimate aim of the second pillar system is not to create a savings culture, but to supplement the first pillar  with meaningful occupational pensions. This simply isn’t happening at the moment.

Those reaching retirement today

Most people who get to the point where either they have to or want to wind down, have three very different visions of “pensions” to consider, and as I said at the top of this blog, it’s very hard to get your head around all three.

The Government pension – the state pension pays out at a distant point but without a single state pension age.

Occupational Pensions are increasingly being switched to wealth management (where their is an IFA) or being paid by an insurance company or the PPF. The original idea that you are paid a pension by your employer is becoming less and less common. The vast majority of people in works schemes have been auto-enrolled into workplace savings plans which bear little in common with pension schemes other than that they enjoy similar tax treatment on contributions

Private saving for retirement remains in retreat. Without an entrepreneurial salesforce of financial advisors fuelled by commission, sales to the self-employed have fallen away. While employed people have auto-enrolment, the self-employed are expected to provide for themselves, and they are not doing so.


What of the OECD’s three pillarsthree pilars 3

The clear vision of the three pillars has been smudged by the realignment of Government incentives and the opportunism of  wealth managers, insurance companies and fund managers.

This is not a criticism of the opportunists, they are in the business of making money out of money and they have adapted to each change in Government policy with flair and aptitude.

What is currently missing in our pensions system is not opportunity – but certainty.

Ordinary people are being enrolled into plans they don’t understand without much clue of how to use the freedoms they have been given, Their legacy savings are remote and often lost to them and the vision of a two thirds of pay , final salary scheme – is no longer even a vision.

Everything seems to have changed except one important thing. People still reach their sixties and expect to be able to stop work and rely on their pension. That expectation will not be met – for most people. We know the reasons – too little in – too little out, but it’s more than that.

We are encouraging people to use the third pillar of private savings to pay themselves a wage for the rest of their life and most people haven’t got a clue how to do that.

three pillars four

There is a difference

We must get back to providing strong second pillar pensions. We know we cannot afford the guaranteed system that did for DB pensions and annuities alike. We know that people cannot manage pension freedoms with a lot of help (that generally isn’t there). We must find ways to give people back their pension – and an expectation of retirement with much greater financial security.


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A controversial consultation on pensions dashboards



How far to DC?

We are midst-consultation on pension dashboards and there’s public enthusiasm for the project There’s industry consensus that the Single Financial Guidance Body (SFGB) will incubate its dashboard in a controlled environment and that commercial dashboards will follow. But proposals to tender the data architecture , putting one organisation or consortium as sole pension finder – is proving controversial

The Consultation proposes following a conventional procurement process. Unsurprisingly this is  supported by the consortium that built the “dashboard-protoype” using the procurement model proposed in the consultation.

But a second proposal has emerged that would replace a single pension finder with a devolved obligation on each pension provider to build their own dashboard integration services, or cluster together around a new market of outsourced ‘integration service providers’.

Advocates of this second approach argue it would encourage innovation, create competition, be delivered faster and would not need a central procurement budget. They claim that by adopting the  accepted data architecture of open-banking. this approach would avoid another  central IT project for Government  to stumble over.

They liken this devolved approach to the way that railway companies competed and collaborated with each other to produce Britain’s rail network in the 19th century.

The dilemma the Government faces is that having proposed dashboards it is reluctant to deliver them. Keeping  the first dashboard and governance within SFGB keeps governance tight,  but does the infant SFGB want to manage the largest data integration project the UK financial services industry has ever seen?

The second proposal actually reverts to  the original vision for the dashboard (outlined by then Treasury Minister Simon Kirby) who advocated in 2016  devolving responsibility to commercial providers and “delivering a prototype within months”.

Kirby may well have approved of calls from todays “Pentechs” that providers agree sign up to open their data to whatever standards are generally agreed (in return for getting  access to that data themselves).

Pentechs want instant commercialisation, so that whatever they build, they get to use at once.

they point out that having built a prototype, it’s time for the main event. They see the vetting of pension finders as a matter for the FCA who could use the  existing Account Info Service Provider permissions. Co-ordination of these permissions could be put in the hands of the Open Banking Implementation Entity

Since the dashboard was handed to the DWP, Kirby’s proposals have been reversed into a siding. The hope is that after the consultation , the dashboard will be back on the mainline. There is some hope that this will happen Speaking at the launch of the Dashboard consultation, John Govett (CEO of SFGB) stated his intention to deliver at high speed.  The SFGB must realise that the process laid out in the consultation is quite the opposite of Kirby’s “dashboard within months”.  Procuring a single pension finder risks perpetuating recent frustrations.

The industry consensus will undoubtedly be for a conventional approach, it is the line of least resistance for providers who will not be challenged with compulsion for at least three years.

However, consumer expectations are changing, and having been promised a dashboard – they are unlikely to be patient with the speed of delivery proposed in the consultation. The political imperative is to meet the expectations of the public and avoid another IT procurement shambles.

Speaking at the TISA conference, shortly after taking her new role at the DWP, Amber Rudd told her audience that she intended this to be a genuine debate with the Government in listening mode. She will certainly get that debate.

This article first appeared in Professional Pensions and the original can be read here

For further reading on this subject , read Pension Bee’s three excellent blogs which can be found here.

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Managing pension expectations – are we doing enough?


This is one of those blogs where my focus is on big Government – or policy – rather than the little things that go into making political strategy happen.

For a long time, as long as I’ve been working, there has been an expectation that the wages we get from our pensions and investments would cover around two thirds of our salary. This was what our parents and grandparents were told and though it didn’t always work out, it was what was on offer for a lifetime’s work in public service or from a private company with a pension scheme.

So I read this tweet with the shock that comes from listening to an old friend who you’ve been ignoring a while. Andy Young is an old friend and I have been – well – ignoring what he’s been saying. But I can’t for ever- not only has he been right throughout his career as one of the Government’s senior actuaries, but he is growing older with no loss of his acuity.

Why we can’t save enough is clear. There is not enough going into our bank accounts from our wage packets to let us live the lives we’ve promised ourselves and spend enough on our retirement to meet the promise bought by our parents and grandparents.

Either we get a lot more productive while we work so that we can afford to spend more on the future, or we change our futures to meet our diminished financial resource.

“I won’t be able to afford to retire” is a common theme from working people. Unpleasant as it sounds, pushing out retirement beyond that other great misconception – retirement age – is generally accepted by the working class (by which I mean the class of people still working).

But for those who cannot work?

The problems become acute when people stop working. I was alarmed to read this news from the ever-reliable Paul Lewis.

Of course yesterday, people were looking the other way (apart from Paul) and surprisingly the Daily Mailhomeless 2

It’s no surprise to see the benefits for those below state pension age being eroded. The DWP get their money from the Treasury and the Treasury do not look kindly on anything that smacks of moral hazard. So those sleeping rough the next few (cold) nights should remember that they have no one to blame but themselves.

If you read those last two lines and thought that I’d turned into some far-right Gradgrind, then I’m a better impersonator of some of the Treasury mandarins I’ve met – than I thought!

It’s no laughing matter. If you have lost the will or capacity to work because you’ve become mentally or physically sick, learning that there is nothing coming your way by way of pension credit till you reach the state pension age is very bad news indeed. That what you had, may be taken away from you, because your partner is still to meet this arbitrary retirement age, will be doubly depressing.

Hard times?

These should not be hard times. For most of the people who read this blog – they are not hard times. This year will mark the 80th year since the outbreak of the last meaningful way this country waged. Since then we have been enjoying an extended peace dividend.

It worked for our parents and grandparents and if your are my age – it’s working for us but it doesn’t seem to be extending to the generations coming behind and the peace dividend doesn’t seem to be spread to those claiming benefits, who are seeing those benefits being eroded cut after cut.homeless 5

I am asking myself – is this the society I want to be in? Do I want to see people’s expectations for older age being managed downwards. Do I want the threat of destitution on those who have saved nothing?

The answer – and this will appall many people – is no I don’t. I would rather see more spent on benefits than less and I would rather target my tax on alleviating destitution – which I see 30 yards from my front door on cold mornings like this, than return to a Victorian value set.

Managing pension expectations?

It seems that the pension expectations of pension millionaires can be understood and campaigned for by the Treasury.

It would seem that  we still see pensions as important for some people – even if the 1.2m people who in 2019 will not get promised help with pension contributions – are to be ignored by the Treasury.

It is almost impossible to square this circle unless you believe in that Victorian value set which rewards the worthy and deplores the poor.

That is not how I want this fine country to manage pension expectations. We must look very hard at the way we are distributing the wealth of this country and make quite sure that the curse of destitution in old age does not spread.

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

The only solution to the net-pay pension problem comes from HMRC



Last Thursday, there was another meeting of the group of us, determined to keep up pressure to sort the problem of net-pay pension contributions this side of auto-enrolment’s next big phasing hike in April.

Just to rehearse the problem, if you are low-paid and in a net-pay pension scheme, your pension contributions could be 25% more expensive to you than if you are in a scheme where contributions get relief at source.

More than 1m people are expected to fall into this category and it could mean you paying more than £5pm to be in your pension. That may not sound a lot is you are full time and on a typical wage paid in the financial services industry but it is a significant extra cost for those on low earnings.

The discount on pension contributions was originally branded the “Government Incentive” to those not paying tax. That changed in 2015 when Government dropped the 4 +3 +1 approach to auto-enrolment – because it recognised that many would not get  the “+1”.  One of the reasons for this was the gap that was emerging between the minimum threshold for auto-enrolment (£10,000 from April 2019) and the minimum threshold for paying income tax – (£12,500 from April 2019). If in any tax year or any pay period in that tax year, your earnings exceed the pro-rated minimum threshold for auto-enrolment – you will be enrolled.

The discount was designed to ensure that the tax-system – which gives up to 45% off pension contributions for high-earners – gave back to the poorest savers. Net pay is financial inclusion in action and it’s working very well for most low earners

For instance , the incentive is paid out to members of occupational pension schemes like NEST and People’s Pension – which operate relief at source, as well aa to contract based personal pensions run by insurance companies and SIPP providers.

But it isn’t paid to you if you are in the vast majority of occupational schemes, that – mainly for administrative reasons, can’t afford to switch from net pay to relief at source. You don’t choose your job on the basis of the pension contribution structure it offers.

So whether you get the incentive or not is now a total lottery, it all depends on what type of scheme you are in.

It’s not right that over 1m people will not be getting their incentive in 2019 and the campaign group is led by Ros Altmann and includes Adrian Boulding of NOW and a number of organisations keen to right the wrong.

Latest developments

Some enlightened employers have recognised that if they run an occupational pension scheme that discriminates against the low-paid, then not only are you running the scheme inefficiently (by not picking up the free money from HMRC),.

This Thursday we heard an excellent presentation from Tesco, who alongside their pension partner, Legal & General, have created a system that means that everyone maximises out the tax advantages of pensions available to them as individuals.tesco workers Higher earners can get their higher rate tax-relief paid to them up-front through salary sacrifice, while lower earners get their incentive through relief at source. There are complex triggers in place at payroll to make sure that those on low earnings don’t lose out from salary sacrifice (or that Tesco doesn’t accidentally pay them a nominal salary below the minimum wage.

This complex system can be put in place at Tesco because it has a workforce of 300,000 that makes it worth designing a bespoke solution. Tesco employs some of the best brains in Britain to make sure that everyone gets the right deal for them and this has meant a lot of bespoke coding of systems – especially around auto-enrolment and salary sacrifice.

Tesco’s pioneering approach could be adopted by other large employers with a large number of employees working part time and/or on minimum wages.  It means disruption and expense but Tesco reckoned that it could bear that cost rather than see unfair discrimination against its low paid staff (the majority of whom are women).

But not every employer is a Tesco

What became obvious during the presentation , is that Tesco are at the top-end of good practice, they are in the right place. Many smaller employers do not have the resource to implement the system of triggers described to us by Tesco. Complex benefit structures aren’t cheap to design or implement.

This is the reason for the title of this blog. There is no solution to the net pay problem other than for HMRC to take the bull by the horns and create the coding that gives employees the incentives they have earned in a pay coding adjustment. The group is currently putting the final proofing on a proposal that will be re-submitted to HMRC which explains how this will work.

Practical steps to help Government out of the problem

Now is a particularly good time to approach Government as HMRC has already committed to making pay-coding adjustments to Scottish people paying income tax at the Scottish rates. We argue that if HMRC can do it for the Scots, they can do it for all UK tax-payers.

It may be that HMRC can do things by halves, which would make the bill more palatable for them. A very high number of those affected by the net-pay anomaly are in Government pension schemes. These could be carved out of any settlement and dealt with by separate negotiation.

It is no good pretending this problem isn’t here. It’s a big problem today and will get a lot bigger in April. It is no good Government departments passing the buck, the DWP and Treasury both have skin in the game and should both be involved in discussions on how to fix things.

The long-term impact of the net-pay anomaly are

  1. the low paid may get priced out of auto-enrolment
  2. the low paid will remain enrolled but not be able to afford to live properly
  3. the low paid will be mobilised, either by private organisation or by some future Government to demand what they were promised and couldn’t get

Right now, the Government seem to have put this problem in the “too-hard” box and it seems that most employers running net-pay schemes have followed suit.

Well done Tesco for looking at this problem and putting in place a bespoke solution.

Come on HMRC, we are not all Tescos, you cannot rely on the private sector to get yourself out of this hole, you need to do some work on the net-pay anomaly right now.


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

Inquiry on contingent charging for transfer advice? Bring it on!



The Work and Pension Select Committee is holding an inquiry into the way that pension transfer advice is charged for. This may seem an arcane subject but it’s not. As this blog has said many times, contingent charging was the lube that made the transfer market deposit up to £36.8bn into SIPPs and insured personal pensions in 2017 and over £10bn in the first quarter of 2018 alone.

The committee is calling for evidence of a link between contingent charging and the alleged mis- advice to over 50% of the estimated 200,000 people who transferred out over the past two years.

I know people who read this blog who took £1m + transfers from gold-plated de-risked DB schemes – some of which they de-risked themselves. They paid for that advice with their own money – and paid the VAT too – both of them. Why? Because they didn’t want to lock into some crappy advisory deal (one of them used that phrase), when they could manage their money better themselves.

That’s heroic stuff – those people make their money managing other people’s money, why shouldn’t they manage it themselves – one paid £10k + VAT and the other £8k +VAT – the VAT would not be recoverable.

Compare this pair with the people who transferred on average £400k from BSPS, they were not getting such good CETVs (typically 25 rather than 40 times the payment forsaken) but they paid nothing to get their money out – their fund paid it for them. They transferred out on a system called contingent charging which lubed the process and made it all “oh so easy”.

The W&P Select is calling for evidence. I can’t evidence myself. I refused to transfer my DB pension – I refused to take tax free cash – I am a Zurich Pensioner and I have no gilts!

My evidence is simple. If you can do better than a DB pension scheme, pay to have your head examined and pay the VAT – you may be right but the chances are you are deluded and a good adviser like Phil Billingham or Al Rush will tell you so.

If you have no cash but a big fat pension – like most of the people who were approached by Active Wealth, you should not be allowed to be seduced by a no win no fee transfer deal – promoted with a sausage and chips dinner. If you can’t pay the advisory charge (and the VAT) – you can’t have all your money in a CETV.

I know that Al Rush disagrees and points to special circumstances like single people with reduced life expectancy and a need for cash now. I have no doubt that there are people like this and no doubt that some have no money to pay for an upfront fee. But they are exceptional and I have no worry for exceptions to be dealt with via an exceptional process by exceptional advisers like Al.

There should be a process for quick release in dire circumstances and it’s the kind of process that could run through FOS, FSCS or even SFGB – a hardship committee could be set up.

But the exceptions cannot drive the process. Read my recent blog where I called on Government to take positive steps to reshape the transfer market.

Bring it on

I welcome this initiative by the Work and Pensions Select Committee who I know read what I write (from time to time!).

Here is their call for evidence – I will of course be sending this blog and those like it.

To help the FCA with its next steps, we want to hear from anyone who has been affected by this issue.  Have you, or someone you know, received taken advice about a defined benefit pension transfer? Did you have a good or a bad experience? Do you think this was driven by the financial adviser’s charging structure? If so, please tell us your story by Thursday 31 January 2019.

If you do not have personal experience of this issue, but have views on banning contingent charging, the Committee still wants to hear from you. In particular, relating to the following questions:

  • Does contingent charging increase the likelihood of unsuitable advice?
  • Wh