Why are university staff going on strike?

stuart croft

Stuart Croft  – VC Warwick


My son has started sending me the announcements he’s been getting from his University about impending strike. He’s at one of two Universities who have been leading the charge amongst employers calling for an end to DB accrual in the Universities Superannuation Scheme(USS). I’ve had to explain that the reason his teachers won’t be teaching him (something he’s paying for) is because of this dispute.

This morning, the Prime Minister will announce a review of the way that students meet the cost of their education, she’ll be doing at a time when students will be accruing expensive debt and getting very little for it. The timing isn’t great.

A few months ago, I wrote a blog called “Postmen want to strike – is it any wonder“. I made it clear that I supported the Postmen who wanted a “wage in retirement” and were rejecting offers of a cash sum at retirement. Not all postmen voted for a strike but 89% did – showing that pension freedoms (for them) came second to the keeping of a decades old promise.

I wish I could be as certain of my support for the members of the University Superannuation Scheme. If the Royal Mail and CWU had not reached a pension settlement, I would be. In some ways the financial case for keeping USS open for future accrual is stronger than Royal Mail’s. The Universities (UUK) present a strong covenant (whatever rubbish tPR has said about universities failing). The Universities can afford the future cash-flow and balance sheet implications (especially if they kept to a growth strategy on their investments).

But it now seems that (led by Oxford and Cambridge) the Universities themselves have dug in their heels.

For all this, I cannot write “lecturers want to strike, who can blame them” and this blog from the Vice-Chancellor of Warwick University is why.

I have no answer to the question “why are university staff going on strike?”

We are now only days away from a period of industrial unrest which I strongly believe could have been avoided and, with goodwill on all sides, could still be avoided.

I have been very public with my criticism of the pension valuation and the subsequent decision by UUK to advocate what is in effect closure of the defined benefit element of the USS scheme.

I do not believe that either party to the USS negotiation have exploited the full range of options which could have generated a meaningful pension for University staff without jeopardising the financial future of the sector.

I am therefore calling for an early return to negotiations, with a more open and imaginative approach from both parties. A return to active negotiations with a real willingness by all sides to explore every option would of course enable deferral of industrial action until those avenues have been fully explored.

In short, I question the need for the change in the valuation assumptions last autumn which gave rise to the scale of this challenge. Second, I would ask that consideration is given to options which would protect the less well paid in the sector and future entrants, perhaps by restricting DB to those in the national pay framework and placing the higher paid into a DC only scheme.

Thirdly, I believe it that instead of focusing on removing everyone’s choice on DB USS should look to give individuals the choice to opt out of DB where their circumstances make this less attractive e.g. some overseas staff.

Finally, I would suggest it is time for government to take as close an interest in pension provision as it does in other aspects of reward in this sector. This could be through legislation which enables risk sharing DC schemes or by underwriting pensions for everyone currently in USS in a way that is more reflective of government support for unfunded public sector schemes such as TPS.

I recognise that there is a deadline being demanded by regulators. But it is vital that we find a way of resolving an issue which will be costly, both financially and in terms of reputation, for Universities, the sector and – most importantly – its students and staff.





Posted in pensions, Royal Mail, USS | Tagged , , , , , , | Leave a comment

HMRC and FCA complicit in the democratisation of villainy.

If the FCA want to get to grips with the problem of contingent (conditional) charging, they had better have a look at the taxation of advice and make changes in the Finance Act 2018 to the way we tax advice.

First the facts, as verified by those financial advisers practicing in the transfer market.

Case one

Someone consults an IFA on whether to transfer. IFA says that independent of the size of transfer, a fee of £2500 +VAT will be payable for the research, advice and recommendation on what to do.

Case two

That someone consults an IFA, who says he will do the same research, analysis and transfer and will only charge for it, if a transfer is made. The same fee is payable but this time there is no VAT to pay and the fee can be paid out of the transferred monies.

In case one, the actual amount that will have to be paid is £3000 (VAT adding £500) and the amount that will need to be earned (the client pays a marginal rate of tax of 40%) is £5000.

Put simply, it costs this person twice as much to pay a non-contingent charge and the difference (£2,500 v £5,000) is entirely down to the HMRC subsidising conditional charging.

“Intermediation good – advice – not so good”

I asked top IFA, Dennis Hall why contingent charging gets the tax-breaks while the adviser who charges for advice alone, lands his client with a whopping tax-bill

Actually , it costs twice as much as Dennis and I , hadn’t considered the income tax situation.

Just what “intermediation” has got going for it is unclear. But the impact of this taxation anomaly becomes even greater , if you consider that an adviser who charges conditionally, can also levy the cost of implementing the advice in a tax advantaged way.As David Penney puts it in his tweet.

Treading on thin ice

There is a problem here; even if HMRC were to separate out the recommendation to transfer fee from the implementation fee and stop the lumping of the two together as an implementation fee (non vat-able and payable from a tax privileged fund), the smart IFA would simply knock his transfer fee down to £1 and load the cost of the implementation.

Paul Lewis had a laugh at me when I tried to sum up the problem in 140 characters.


But I forgive him as he put his finger on the nub of the problem


Such a brutal analysis misses the subtlety of my pompous little phrase but gets to the heart of the matter. Right now it is massively expensive to pay a non-contingent fee, so expensive that only those with deep pockets can do so.

If HMRC’s (and by extension) the FCA, wants to make transfers special, they can ban conditional charging and continue to  levy tax and VAT on the non-contingent fees. That would make transfers a rich-man’s game,  (it wouldn’t however put an end to the endemic issues with VAT and vertical integration).

Putting an end to Contingent Charging would reduce transfer activity.

The conversation on contingent charging that started when Martin Bamford appeared on Moneybox and ended when we all went to bed. It involved about 20 advisers, Paul Lewis and me. There was one tweet from Martin Dodd which should be picked up on by the FCA and any financial journalist worth his/her salt.

This is the grist of the matter.

By allowing contingent charging to be deemed “intermediation” , the FCA and Treasury are putting the cost of transfer advice within the range of everyone. Advisers love it, they are simply taxing people’s futures with minimal pain today. As the perceived benefit of the pot over the pension is so enormous, no one is asking any questions.

But as we discovered in yesterday’s blog, the FCA knows that 53% of the advice given to those transferring is questionable, so it really ought to be doing something about the frictionless process created by their own tax rules (the FCA and HMRC both come within the compass of one Government department – HM Treasury).

“Intermediation” is the democratisation of villainy

The FCA’s wider problem with vertical integration (as articulated in the asset management market study) is also made worse by “intermediation” as it makes the non- charging of VAT , a benefit of any advice linked to the product being recommended.wealth product

Wealth managers, as the picture to the right suggests, now consider themselves “manufacturers” and can integrate their advice into the product, exploiting the same “intermediation” loophole as those affecting transfers.

Indeed the majority of firms holding themselves out to be transfer specialists – are wealth managers at the same time.

But of course they are more than wealth managers, they are altruists, for they are – through contingent charging – offering the most cash-strapped access to their pension pot!

I have (again) pompously referred to this as the democratisation of  villainy.

Why this stinks!

The current use of tax-privileged pension pots to pay for everything is ripping off the tax-payer and making IFAs  rich. It is enabling transfers that are questionable or downright wrong and it is storing up problems for tomorrow.

But tax-privileged intermediation underpins the entire shooting match of vertically integrated financial services, extending way beyond transfers and wealth management into institutional fiduciary management.

Where you stop is anybody’s guess; but stop it must. We need to stop proliferation of VAT and tax abuse so that reputable advisers like Martin Dodd and reputable clients, who play by the rules, are not further disadvantaged.

I will shut up now, aware that I have opened a particularly smelly can of worms which most of my readers will recoil from, because they are in part complicit to these bad practices.

Posted in accountants, advice gap, dc pensions, pensions | Tagged , , , , , , , , | 5 Comments

Workplace pensions – who gives a flying feck what’s going on?

Share action report.PNG

Share Action is watching.


Data or opinion? What’s the best measure of value?

Most investors when looking for evidence and would prefer to trust data.

Opinion is now measured by “the crowd”, the wisdom of a great number of people is turned into data. The opinions of experts counts for something but successful enterprises are driven by bigger data.

It worries me that there remains in my world of pensions, an oligarchy of experts who’s opinion counts for more than big data. I refer to the “usual suspects who’s names occur on the majority of IGC committees, master trust boards and the governors of our pension institutions.

The saddest statement from the chair of an IGC or Trustee board is “in my opinion , we offer value for money”.  I expect to hear this statement repeated again in again throughout the upcoming IGC reporting season.

The opinion of those who govern our pensions is only as good as the data that it’s based on

Share Action has produced a review of the 2017 annual reports produced by the independent governance committees (IGCs) for contract-based pension schemes (which they began last year after the FCA said it was indefinitely delaying its own review). They’ve focused on the transparency of the IGCs’ reports, to see if an external observer could understand what value scheme members are getting from the different providers.

While they’ve seen emerging good practice in the reports, they found that many of them were too vague and unsubstantiated to allow an external observer to understand the value being offered by providers. For example, more than a third did not state what members were being charged and nearly half gave no data on investment performance. To me, this doesn’t meet the FCA’s policy intent, which was to increase transparency and encourage comparison between IGCs.

Clear and comparable reporting is needed from IGCs to demonstrate transparency and build accountability. It is important for IGCs to assure scheme members that this is not just another case of industry assessing industry, and that this governance gap is truly being filled.

Who watches the watchers?

The Share Action Report produces a ranking table of IGC reports that correlates pretty well with the rankings I produce in April (see bottom of article)


Some of the low scores are easily explained

share action scores



What Share Action (and I)  are asking for.

Share Action have made some recommendations for the IGCs on how they can report more effectively. They have also recommended that the FCA should set a specific definition of value for money and issue clear, comprehensive guidance on how to assess it. The widely varied standards of assessment and reporting demonstrated by IGCs indicate that a more standardised approach is required.

In case anyone thinks that master trusts and single occupational schemes  hold out a gold standard, let’s be clear – they do not. If anything they are less accountable, they do not report in one go and the majority of their reports are only available to members. Fortunately , the Pensions Regulator does monitor what is going on and this week issues fines to a number of miscreant trustees whose reports were considered inadequate.

You can read what the Pensions Regulator is doing to enforce better standards of reporting here. I look forward to the DWP’s conclusions following its work on value for money disclosures which is due out later this year.

But more can and should be done by the pensions industry to independently monitor value for money and provide ordinary people with help about their pensions.

To this end, the IDWG are producing definitive templates which collectively can capture the data we need to understand what we are paying for funds.

To this end, a disparate group is working to collate further published data on the costs for members of participating in occupational pensions (including master trusts) and group personal pensions.

To this end I hope can generally working to create definitive performance data that can compare one form of workplace pension with another by way of absolute and risk adjusted performing.

And from these data sets, I hope IGCs  will be able to provide value for money ratings that can be used to rank all workplace pensions against each other in league table. Those offering most value at the top, and those offering least , at the bottom.



My ratings of the IGC reports in the past two reporting rounds. Note these are based on my personal opinion and not data! I will be looking to incorporate the Share Action transparency ratings as well as other ratings (for instance the Pension Bee Robin Hood Index) into my assessment of engagement, effectiveness and transparency (in VFM) in 2018

IGC2017 framed




Posted in Henry Tapper blog, IGC, pensions | Tagged , , , , , , , | 1 Comment

Time for a DC upgrade?

upgrade underway

I was wading through yet another long and technical explanation of CDC  when I got my Eureka moment!

I don’t want a CDC plan, I want a DC upgrade!

I’m not dissing legal eagle Sandeep Maudgil (who’s soon to appear before the Work and Pensions Select Committee to opine on what CDC is).  Sandeep works for Slaughter and May (who can charge more in an hour than most of us work in a week). Sandeep is a brilliant lawyer who can explain CDC in the context of the Netherlands, Canada and UK DB legislation. The trouble is, the only people reading his article are people like me and the other friends of CDC!

CDC has become a playground for academic and legal experts intent on displaying their technical proficiency. For years it has been discussed by actuaries as a way of de-risking Defined Benefits.

Sandeep’s article (ironically in that most pragmatic of papers – FT Financial Adviser) is summed up in three “key points”

  • CDC schemes might be an alternative to defined benefit schemes
  • In a CDC scheme, the actuary is asked what rate of pensions members can reasonably expect to receive
  • CDC schemes are widely used in the Netherlands, Denmark and certain parts of Canada.


We are told

“the impetus behind collective defined contribution is the idea that the UKs’s current legal framework for occupational pensions is too binary”


The article has its moments, where I can get excited but again and again it shows it is being written from the perspective of someone immersed in defined benefit culture. It sees CDC’s challenge as

getting people in the UK accustomed to a new form of pension arrangement where pension amounts are only targets rather than being guaranteed entitlements, and where pensions might reduce once in payment.


Most people in the UK do not have an occupational pension that gives them these guaranteed entitlements. Most people have a combination of workplace and non-workplace DC pensions that guarantee them nothing but the freedom to go and buy a financial product like a drawdown plan or an annuity!

I’ll say it again – I want a DC upgrade!

It’s time that ordinary people wrested control of the CDC arguments from the actuaries and lawyers and academics and applied them to their own personal circumstances.

I want a DC plan that pays me a wage for life. I don’t care about binary occupational plan options, I don’t mind that CDC pensions aren’t guaranteed, I just want a simple way of converting my DC pot to a DC pension.

I don’t want this kind of rubbish “non workplace pension”!

value chain

I don’t want a workplace pension that isn’t a pension at all!

Every night I have to watch the DWP tell me on the TV to “get to know my workplace pension” and every night I ask – “what workplace pension?”. My workplace pension pays me a pot not a pension.

I don’t want a workplace savings pot – I want a workplace pension !

workplace pension 5

what pension is that then?

I’ll say it again – I want a DC upgrade!

I want freedom to do what I want with my pension , but I don’t want the freedom of a “pot”! I want in retirement , what I had in work, the payment of regular amounts into my bank account so I can budget with a degree of certainty. I want a wage for life.

What Dutch actuaries, or Canadian lawyers or Danish and German regulators are getting up to , is of absolutely no interest to me. I don’t want to know thanks very much.

I want a DC upgrade so that I know that when I come to draw my pension , there’s a pension there to draw – and I don’t want ever to have to buy an annuity!

I’ll say it again – I want a DC upgrade!

So when I read that 142,000 postal workers are going to have a CDC plan, I try to work out what that means and how I can explain CDC to a postal worker (more specifically my postman).

It’s so simple – it’s a workplace pension that instead of paying out as a pot – pays out as a wage for life. It’s an upgraded workplace pension suitable for people who aren’t pension experts.

  • Does it stop people who want to be pension experts transferring their money into a SIPP? NO

  • Does it stop people who want to give their pot to a financial adviser to manage? NO

  • Does it stop people like JR who want certainty exchanging the CDC pension for a guaranteed annuity? NO


What the Royal Mail and the CWU have agreed upon, is a solution to 142,000 workers joint problem, they did not want a pot but a pension.

The Royal Mail could not afford to guarantee the pension, but they could afford a generous contribution into the pension plan so that the potential pensions look good.

The members were prepared to take their chances on the markets and have accepted the defined contribution and are prepared to collectively underwrite the risks of the “hardest nastiest problem in finance”.

Somewhere in the background are actuaries, lawyers , regulators and the odd academic, making this happen. But this is not, and should not be about those clever folk, it should be about people like you and me and our money!

CDC is a DC upgrade and the best thing to happen to workplace pensions since auto-enrolment! I commend it to the House!

upgrade underway

I want a DC upgrade please!

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

Bamboozled by vultures! – The Work and Pensions report on Port Talbot

time to choose

Though it reveals little new, Frank Field’s report into what happened  in the British Steel Pension Scheme is nothing if not a good read.

But we shouldn’t allow headlines about sausage ‘n’ chips suppers and factory-gate skulduggery to get in the way of the report’s conclusions and recommendations.

This was a serious inquiry that has thrown up some important messages.

  • Even as good a pension as the British Steel needs a sponsor; without the support of TATA, this scheme’s natural home was the PPF which is where it went.
  • Giving people a choice of lifeboats was for a substantial minority of steelworkers for themselves, they’d have swum for themselves – pretty well no matter what.
  • The job of protecting such people from the worst consequences of an emotional and irrational decision was simply not done; either by the Trustees or advisers.
  • This was out of a misjudgement by the Trustees and out of opportunism amongst a small band of entrepreneurial advisers (who I bet now wished they hadn’t got involved).

My part in all this is rather over-represented in the report, as I have the gift of the gab and am quotable. But I am pleased that I and Al Rush and Rich, Stefan and David, were able to highlight the systemic problems with transfer advice in the UK today

  1. That where demand is strong (there were over 15,000 CETV quotations in circulation out of a transferrable population of 43,000) , then advice tends to be commoditised. Stories of advisers doing 7 transfers in a day abound.
  2. That the new kind of SIPP (see diagram below) has allowed some advisers to subvert the RDR and get paid via the back door. There is nothing illegal about these SIPP structures, but they do the same financial vandalism as scams.value chain
  3. That where demand is so strong, a feeding frenzy will emerge and that Port Talbot was entirely predictable (indeed I predicted it in August to a group of BSPS Trustees and their advisers).

Having been an IFA in the 1980s and 1990s, I totally understand both the good and bad advisers I have been in contact with. The Pension Freedoms are a side issue in this. What created the feeding frenzy ,was not the capacity to spend the money when they liked (only 4% of members in an early poll wanted to control their money themselves), it was the telephone numbers , the financial and emotional response to Tata’s covenant and the failure on everybody’s part to explain why transfer values are so high.

poll bsps anon

One person I spoke to explained that they thought the transfer value for their £30,000 pa prospective pension would be £30,000. It turned out to be over £700,000. Can you blame that person being amazed?

What added fuel to the fire was a perception that TATA and the Trustees were acting in unison to prevent transfers. While Time To Choose talked of BSPS2 and PPF, the steelworkers talked of lifeboat v transfer. The Trustees and their members weren’t having the same conversation.

I’m now finding myself talking to the Trustees and managers of other large pension schemes and it turns out (surprise surprise) that they have their own Port Talbots. Indeed some of the advisory firms “volunteering” not to advise steelworkers are also causing “de-authorisation issues” for other schemes.

Port Talbot has changed the landscape;

  • 9 firms have removed themselves from the transfer market
  • 1 firm (Active Wealth) has gone into liquidation
  • The FCA’s sampling suggests that in 53% of cases where transfer advice given the advice was either iffy or downright dodgy
  • As a result, all transfer advisers can expect the “inspector to call” in 2018
  • and the Pensions Regulator and FCA have agreed to establish a joint pensions strategy.

I hope that we will see in 2018, a diminishment- if not the end- of conditional pricing, the practice of only charging a client if they don’t go ahead with the transfer recommendation

I hope we will see an investigation into advised SIPPs as part of the platform review


I hope that the FCA will weed out the IFAs who have the qualifications but not the integrity, needed to help people in this most difficult area of financial advice

And I think that those, like me who advise trustees, will recognise we hold a part of the blame. We are supposed to be able to look at the future and predict things with help of data from the past. I could tell, as a former adviser, where things were heading , but it looks like the better qualified advisers talking with the trustees – couldn’t. They shouldn’t be able to walk away from the consequences of Port Talbot (even if they don’t know where Port Talbot is).


taibach al

If you want to hear me spout some of this on Radio 4’s today program, the link’s here (minute 1.17)



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

Are you feeling DC sick?

DC sick

We’ve all been there!

Joy for DB is pain for DC!

ppf good

DB looking good (according to PPF)

equities one month

FTSE 100 – one month – feeling a little DC sick?


I am sure I am painting too simple a picture and that I’ll be whacked over the head by my learned colleagues, but the general jubilation breaking out over UK pension scheme solvency levels, is coming at a time when the average DC investor is suffering a “market correction” wiping as much as 10% off their market savings.

I believe this is called a barbell, what is good for Peter is bad for Paul and vice versa.

It’s a bit like Boris Johnson wanting everyone to enjoy Brexit, even if for the remoaners , it’s a pain in the bum. I don’t need people whooping it up in the land of the perpetual gilt (on the road to buy out) , when I’m trying to get on with business as usual!

Business as usual for me is the incredibly boring world of FABI, where funding levels do not jump up and down because Mark Carney breaks wind over monetary or fiscal policy. FABI is based on real world economics, what people make and how companies prosper, rather than the seemingly arbitrary decision of the Bank of England or the Fed.

As a DC investor, I am into patient capital, I am 56, I don’t want to start drawing down till my appetite for earning diminishes (and it’s showing no sign of diminishing). Consequently, what happens to interest rates is of no consequence to my pension.  I’m looked after by my former employer (thanks very much Zurich Financial Services) – I’m very happy for them if they are a bit more solvent but I was even more happy when they carried me through periods of insolvency.

So I’m alright Jack – but what about the rest of us!

I do appreciate David Robbins tweet .

Higher yields produce lowest aggregate s179 deficit in nearly four years. But headline £51bn shortfall = £174bn of deficits minus £123bn of surpluses. £174bn arguably more relevant for potential PPF claims. https://t.co/5Ng59YgWC4

— David Robbins (@David_J_Robbins) February 13, 2018

If David is worried about the impact of those schemes in deficit going into the PPF, then he should remember that those in DC have just taken a PPF style haircut (10% off) in one month!

And if he’s worried about the financial resilience of the PPF, he should remind himself (I’m sure he does) that the biggest winner from the recent uptick in gilt yields, will be the PPF itself, which is inexorably heading for self-sufficiency at a heady rate.

As we in the Friends of CDC maintain, the PPF looks like a very ugly CDC scheme right now, ugly in that it is full of ugly assets , but friendly as it is going to pay out pensions to millions of people in the most efficient of ways.

DB has a strong chin!

The DB world, and especially the PPF, can look at that  £123bn shortfall with the calm eye of a champion boxer;

“give me your best shot”,

knowing it’s got fitness, a strong chin and resilience!

Because of strong DB schemes (like the one I’m in – praise be!) and because of the PPF, we have a lot of people in this country who have certainty of a supplement to their state pension. They are the lucky people with a DB promise. I am one and I thank goodness I am.

But DC does not know how to cover up!

As said before , I’m not worried that I’ve lost 10% of the paper value of my DC in a week, there are ten years plus of work in me yet!

But there are many I know, including those I’ve met through working with BSPS members, who do not have any way to cover up. If you are in an equity based DC scheme, especially in drawdown, you are hurting. If you are about to drawdown for whatever reason and are in equities, you are in an uncovered position right now.

I am sure most people reading this blog, are able to live with that, but it’s the people who don’t spend time reading pension blogs (eg 99.99% of the population) who I am worried about.

We need to think about them – just as the CWU have been thinking about the 142,000 postal workers. For while the Royal Mail DB scheme , is safely tied up in the harbour (close to 100% gilt funded – immunised from stormy weather), those in DC are taking a right pummelling from the financial storms.

Former DB members of Royal Mail are being offered a CDC alternative, one that pays a wage for life , not a “pension pot”. They can rightly look forward to a pension – albeit a pension that is to a degree – market related.

Those who have and are transferring out of DB schemes have no such prospect (yet). those who are being shoved into DC schemes (as those in USS and BT are about to be) have no such comfort.

Feeling DC sick?

So while I am happy that DB is looking more secure, while I am comfortable that the PPF is heading for self-sufficiency, I am not happy or comfortable for most people in DC. Most people in DC are feeling DC sick right now, having been tossed around by the market for the past couple of weeks.

If you are DC sick and want some relief – come and join the Friends of CDC!


target pensions

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

Aegon stung into action by the Bee!


The repression of nearly 900 Aegon customer’s is coming to an end

Let your people go!

It looks like Aegon has backed down and agreed to treat its customers wishing to transfer to PensionBee, fairly.

This report, based on what appears to be a press release from Aegon, suggests that Aegon will release the 874 policyholders who they’ve trapped in their departure lounge for up to 214 days.

pension bee tracker

By any standard , Aegon’s behaviour has been reckless.

    • Those stuck in the lounge have been forced to pay high charges for funds they no-longer want to be in. Financial loss will be quantifiable, Aegon are running severe risks of litigation – especially if a class-action is invoked from those who can prove loss.
    • Nearly 41,000 people have watched PensionBee’s customer video explaining to potential customers how to leave Aegon. The video has been well-liked , even by Aegon’s senior management in the Netherlands
  • Aegon’s UK management have messed with Aegon’s corporate brand, holding it up to ridicule on pages such as mine and in the financial press. They risk much wider coverage , should a national get hold of the story.
  • Aegon’s behaviour should be of interest to the FCA; they have not treated customers fairly and at a time when we are trying to get better pension engagement with ordinary people, Aegon have contravened just about every unwritten and written rule in the book
  • Aegon have shown up the timidity and lack of independence of their IGC which has done nothing to bring it to heel.
  • Finally Aegon has shown itself thoroughly incompetent in its conduct of due diligence. If it cannot see a good’un like PensionBee, how could it spot a bad’un.

During the course of the 8 months that it has turned off the tap to PensionBee transfers, PensionBee has received a substantial equity injection from State Street. Did it not think to refer to that due diligence and ask itself why one of the world’s largest fund managers was backing the management of the organisation who’s integrity it was questioning.

In a report by Money Marketing, Aegon  confirmed it will resume electronic transfers to PensionBee, providing it gets “personal assurances” from the directors of the company about key aspects of transfer process.

 “We are seeking assurance from PensionBee that they always capture clear authority from clients to carry out the transfer, and that they provide appropriate warnings and information to customers to ensure they understand any features within their current policy which will not be replicated within the PensionBee pension.”

This ranks as one of the weakest climb downs in the history of financial services – “personal assurances”? Knowing the management of Pensions Bee I have personal assurance a plenty of their good intentions. I can also see that the customers who’ve been able to escape the departure lounge are extremely happy in the Pension BeeHive.

pension bee trust pilot

I have never seen a trust pilot score this high (Pension Plowman)

So what is going on?

Why should Aegon hold itself up to general ridicule, risk the wrath of the FCA, the pension press and most importantly its own stakeholders – it’s shareholders and customers?

I don’t know. I don’t know why the Aegon IGC have not intervened as they could, I don’t understand why BlackRock, which recently sold its DC platform business to Aegon (and which manages the greatest part of Pension Bee’s money) didn’t intervene.

I don’t understand why the FCA hasn’t commented.

I don’t understand why the start-up, is being bullied in this way and why Aegon cannot see how embarrassing it is to their staff, who are being tarred with the corporate brush.

None of this makes any sense at all.

In one sense, I don’t care much, so long as the 874 people in the departure lounge catch their flight in the next couple of days and buzz off to happier pastures.

Corporate dis-Grace.




But I don’t think we can just let this matter drop. It is time to hold Adrian Grace and his management team to account for the distress they have caused PesnionBee’s customers and PensionBee (which is also out of pocket over this).


If we think it is ok for Aegon to trap customers in the pension departure lounge, we presumably think it’s ok for others – including NEST – who frankly haven’t got a much better record, nor the various third party administrators running our single employer DC pension plans.

While they debate standards for the passing of data to the Pensions Dashboard, many administrators still haven’t got to first base when it comes to passing DC transfer values to third parties.

Aegon is actually in the Origo transfer network and so is PensionBee; there was no excuse for Aegon not to have treated PensionBee as it does the other members of the network and exchange monies with them as pension partners.

But most of the occupational DC pensions are not subscribing to the Origo pension service. NEST tell us that they do subscribe but only have a process to take money in – not pay money out!!!

In short, if we allow Aegon off the hook, then we allow a great part of the pension industry to assume that pots can follow members at the pace they – the fiduciaries dictate.

This is as ludicrous as the attitude of Aegon. Driving up administration standards for occupational pensions is as important as changing the customer care of some insurers.

Support PASA in improving transfer standards.PASA

Fortunately, the rights of ordinary members of occupational pensions to first class administration are championed by an independent body for which I have great respect.

Margaret Snowden’s PASA organisation, which (among other things) campaigns for the rights of deferred DC members is holding a session of its conference in London on 13th February (next Tuesday afternoon).

margaret snowden

Margaret Snowden

Margaret (Princess that she is) has released a press release which tells us

“With GDPR, IORP II and Pensions Dashboard on the horizon, data management must be top priority for trustees and it is important that deferred members are not forgotten in this process.

Although active members may present the potential challenges for years to come, in actual fact, it is .. deferred members who pose the greatest number of current challenges for schemes.

Deferreds account for a huge proportion of overall membership and liability, so not giving them proper attention can lead to any number of problems.  These might include transfer requests and concerns about delays, as well as poor data quality hampering de-risking activities for schemes thinking about the ‘end-game’

.“Our conference has been set-up to provide people with practical advice on how to better manage data and improve transfer processes, whilst looking at how new kinds of technology might improve the way deferred members interact with administrators and create a more positive process for all”

I think they’re talking mainly about DB transfers , but DC transfer processes are just as important.

Sadly I can’t make it , but I hope that some people reading this article will, and will ask

“why so many third party pension administrators do not use the Origo clearance system”.

If you want to find out more about the good work PASA does, here is the link to PASA. 

If you want to register for the Conference, here is the registration link. I thoroughly recommend the event.



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All quiet on the charges front

all quiet

I wasn’t at yesterday’s meeting of The Institutional Working Group but I know a few who were and the feedback I’m getting is good

  1. A sensible methodology which can be understood
  2. The platform for a common way for pension funds to find out how much they are paying for asset management
  3. General agreement among all stakeholders in the room

This is quite an achievement and the recently maligned Chris Sier and the FCA, should be congratulated. CONGRATULATIONS.

What appears to have been said

In the best traditions of British transparency, this is a compilation of whatsapp messages I got from people in the room. If I’ve got the wrong end of the stick, hit me with the other end and I will edit this article. For those of us who have wanted cost transparency for years, the meeting is of great importance. Perhaps the FCA could consider some kind of live-streaming – as the Work and Pensions Select Committee do -so that people like me can get it right first time!

The template that is the first practical output of the Working Group is to follow. It will be a draft of the reporting template. It was not on display yesterday and the meeting was told it would be distributed in the next few days. The IWGs intention is to release a stable template by the middle of the year

TISA asked a question was asked from the floor on whether the template would be consistent with MIFID- an assurance was given it would be.

Alan Miller asked as to how the regulators will deal with those who do not complete the template properly. I have no record of a response.

And it seems from the information that I have, that there was a strong commitment to adopt the template from the LGPS.

The Investment Association , while speaking well of the template , stopped short of a commitment to adopt it.  They spoke of “next steps”.

The Investment Association proposed that the focus of the group shift to retail investors so that its output passed “the Daily Mail test” (whatever that is).

Where this gets us

This look like a major step forward- Unison have suggested we use the word “historic”.

The consensus seems to be that the IWG ahs found a balance between the ability of asset managers to supply data and a satisfaction of user’s need to know what they are really paying.

The IWGs has been across all asset classes and the cost templates will be designed with professional usage in mind. The output from the data collection is focussed on getting better consumer outcomes. Those buying on our behalf will have better buying power and this will ultimately bring costs down.

For me the most important agreement of the IWG is the focus on providing buyers with a single number. Though there may be many cost templates, a reference template will provide a common lexicon meaning that when costs are consolidate into the single number, disclosure will be consistent.

This means that we will be able to compare the cost of apples and pears, while recognising they have different value.

In the words of my correspondent the methodology put in place by Chris Sier and his colleagues is “super-solid”. Clearly that contention will be tested over the coming days.

But for now, all is quiet on the charges front. For those who have followed this debate over the last five years, that’s quite a step forward!

all quiet two

Jawing not waring

Posted in pensions | 3 Comments

Trial by twitter’s fine by me!

An IFA withdraws its transfer service complaining it’s the victim of “trial by twitter”.

Accountability is something that falls hard on adviser’s shoulders. Because we are in the business of longer term investment, the outcomes of our advice will typically be judged when we have long departed from the scene.

So the system of summary justice meted out by twitter to “the Pension Review Service” AKA County Capital Wealth Management has come as a shock.

It shouldn’t have.

Learn from feedback, don’t fight it.

Yesterday I was at SDWorx’s conference where its UK CEO told the audience it Net Approval Scores with its customers weren’t all they could be, he even went so far as to say he couldn’t do much right now about them – Doug Sawers was right on both counts! You can’t censor what your customers and prospects say about you, you can only influence what others say about you over time.


Now Pensions

NOW Pensions were flagged as failing their customers from the early days of their association with staffcare. Instead of doing what they are doing now – building a proprietary system to manage interfaces with payroll, they chose to outsource (to Staffcare).

This blog has repeatedly warned NOW not to do this, is suffered a trial by social media (I wasn’t the only one) and it is finally investing £4m in putting in a proper system. If NOW had licensed, it would have been a lot easier. Now’s trustees would not be being fined by the Pensions Regulator and customers would not be jumping up and down with frustration. NOW should have listened to social media and now it is paying the price.


If you, as a corporate, fall victim to a social media storm, as Aegon currently is, it is almost certainly your own fault and you will have to pay the price for so long as you stay in the hole.

Trial by twitter/youtube/blog is fine. It is the way to be held accountable in a way that you will not be held accountable by Regulators. The FCA will catch up with Aegon and require it to treat Pension Bee’s customers fairly, NOW will put their house in order (by April or presumably close its doors till it does).

Pension Transfer Review Service

As for the Pension Transfer Reviewers of County Durham, they have been weighed in the balance and found wanting. They have “volunteered” to cease dealing in transfers and now they are sulking off complaining that they have been hard done by.

Let’s remember that the biggest victims of social media in the Port Talbot affair are not “the Pension Review Service” but the FCA, who were given a good kicking by Frank Field in the Work and Pensions Select Committee.

Learn like SDWorx , BSPS and the FCA

I was there when the kicking happened and I don’t see the FCA whingeing about trial by social media. I hear plenty of people complaining that W&P is a kangaroo court and they all have one thing in common – they are terrified by the possibility of following the FCA.

The summary justice meted out by judge Frank Field, is an extension of social media. I had lunch with Allan Johnston , Chair of Trustees of BSPS yesterday, we talked of Stephen and Rich and David’s Facebook Pages, I pointed out that these guys were his Member Nominated Trustees for Time to Choose and he agreed. The Facebook pages remain critical of BSPS Trustees and their advisers and they are right to do so.

I now know that every criticism has been read by Allan Johnston and is ingrained on his soul!

What Allan has done, which clearly the management of the Pension Review Service has not done, is listened. BSPS will be dead in 7 weeks and the New BSPS will be born. Hopefully, the new BPSP will be more responsive to its members and better understand its member’s needs – I think it will.

Hopefully NOW pensions will be NOW Pensions II after April 2018 and maybe even Aegon will see sense!

Social media is not going away, people (including me) will continue to be trialled by Twitter and we will continually to be successful. I run (as Gregg McClmont calls it) the bully pulpit. This blog has earned its stripes over 10 years. If it didn’t have integrity it would have been shut down (see Aon’s unsuccessful attempt to “turn off the tap”). It would have been shut down by the firms who send my bosses at First Actuarial whingeing letters (this blog is nothing to do with them- see top right above) and it would have been shut down by the libel courts (which I am constantly threatened with).

There is nothing wrong with the immediate pillory that is social media. Sticks and stones can break your bones but words can never hurt you – unless that is , you are extremely vulnerable to the criticism you are receiving.

sticks and stones

And likening the bullying meted out for corporate shortcomings to the bullying we see in the class-room is as dumb as school-bullying.

We are in the business of providing good long-term outcomes. If you aren’t in the business of taking short-term criticism on social media, you shouldn’t be in business.

I was more impressed by Doug Sawyer’s attitude than I can say on this blog!

As for the Pensions Review service, it should grow up , take the criticism on board and move on,




Posted in pensions, twitter | Tagged , , , , , , , | 4 Comments

Catch a falling knife?

ftseglobalFor the first time since we had pension freedoms , we have a market that appears out of control. As I write, the London Stock Exchange is preparing to open, with the FTSE lagging the S&P by 2.5%. We are bound to see further falls this morning, as we have overnight in Asia.

What does that mean?

For many people – people who have recently acquired “wealth” , through the transfer of cash from DB plans into equity based wealth management, it means a paper loss that will run in to tens of thousands of pounds. People could lose as much in a week as they earn in a year.

Sadly some people will attempt to catch the falling knife and bail out. They will be exposed to the worst kind of market timing, the price they get for units in the funds they are invested in will be manipulated so that everybody involved in the transaction will be protected , except the beneficial owner of the units.

It’s a simple message, when you jump out of the plane , pull the parachute cord, don’t try to get back on board.

Wise words from a Financial Advisor

Yesterday morning, my friend Al Rush posted on a group of steelworker’s Facebook  page , this message.al message

Shocks like this are never nice, but…

..but you don’t need to worry, unless that is, you are due to be drawing down a slice of your funds today or in the next couple of days, when you have no idea how much damage that drawdown will do to your “wealth portfolio”.

For you, the worry is “sequential risk”, which is a wealth manager’s phrase for “the knock on effect”.

Those in drawdown, have been cushioned for the past three years, by one of the most benign markets I have ever seen. Markets haven’t looked like dumping, as they are doing today, and people have got used to the slow accretion of paper wealth, as they skim off a tidy income.

It is precisely at this moment that I should and will advise people that they should not be in the market , unless they are prepared to take this risk and that if people are about to rush to their IFA/Wealth Manager/Stockbroker to cash in their chips. They should get back in their chairs and do absolutely nothing.

Catching a falling knife is a dangerous business, it is best to leave well alone. The reason to invest in equities is for the long-term protection it gives against inflation. Ironically, the reason that the market is dumping right now, is because of the fear of short-term inflation.

Ironically, the very thing that makes equities sore today, will make them strong tomorrow.


sore today



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The FCA can excel; the “non-workplace pension” paper’s a model of its kind

Pensions or potsHenry Tapper and Pension PlayPen response to FCA’s paper DP18/1

Effective competition in non-workplace pensions

This is the response of Henry Tapper and the Pension PlayPen. It is not a response on behalf of any other organisation that Henry Tapper is connected with.

I urge anyone who has interest enough in reading my response to respond themselves. The paper can be accessed using this link


Do you agree with our high-level description of the market? Have we omitted any significant elements or dynamics?


value chain 2

It’s a good analysis. If it has a weakness, it is in comparisons with workplace pensions, in publishing the PLSA analysis of who pays for what, you give too rosy a view of subsidies for workplace savers. The 144 schemes in the survey are self-selecting; the reality for most of the 1m employers participating in workplace pensions is that they have no resource to subsidise anything but the AE compliance. Workplace pensions have their own governance issues, not least that small employers share the buy-side weakness of individual purchasers. The critical difference is the higher levels of protection afforded workplace pension savers who benefit from IGCs and the strengthened fiduciary obligations on master trusts.

The comparison of the £400bn in non-workplace pensions with the much smaller amount in contract based workplace pensions is again a little misleading. The majority of workplace pension saving is in to master trusts. It would be useful for the FCA to consider what master trusts are doing that is attractive to small employers and examine whether there are implications for non-workplace pensions. Are the collective structures that master trusts offer, more helpful to small savers than the individual contracts with insurers? If so – why? These questions might usefully be included in any Market Study arising out of the paper.

Demand Side Weakness

Do you have any comments, observations or evidence about engagement levels among non-workplace pensions customers?

Comments on engagement are typically skewed by personal experience. I and the people I associate with are quite comfortable managing our own money and happily disintermediate advisers so that we can get the best deals for our savings. The Self Invested Personal Pension was designed for people like me.

But for most people analysed in the FCA’s FAMR study, the provision of financial support in retirement remains the “hardest, nastiest problem in finance”. I have been involved for the past four months in moderating Facebook pages for British Steel Workers. I have met quite a few and spoken, mailed and messaged many more. I was struck by a poll conducted early in the Time to Choose process which was designed to find member preferences. Like the PLSA’s poll – it is self selecting (only around 8,000 of the 120,000 BSPS members actively used these pages).poll bsps

What interests me in this poll is the high percentage of steel workers prepared to put trust in an IFA and the low numbers wanting to self-manage the pot created from a CETV.

From my conversations, I was impressed by the confidence that steelworkers had in IFAs and depressed when I found how often that trust was abused.

The BSPS Time to Choose consultation, as with the engagement of postal workers at Royal Mail and teachers at Universities shows that people get the importance of “pensions”. But this should not be mistaken for engagement with the dynamics of managing retirement savings, let alone dealing with the business of paying a “wage for life”.

Do you have any comments, observations or evidence about the factors that influence consumers to switch between or transfer into non-workplace pensions?

One of the most interesting aspects during the BSPS Time to Choose was the reluctance on all sides, to consider transferring into the Tata Steel and Liberty GPP workplace saving products. Both GPPs had the features IFAs were promoting with SIPPS (including adviser charging) , both had AMCs well below 0.3% and both had the kind of defaults that could have managed steelworkers pensions.

On investigation, I found that the workplace pension providers (Aviva and Legal & General) were reluctant to put forward their products (as was Tata and Liberty – lest they were seen to endorse transfers). Perversely, the opportunity to use good workplace pensions to manage out transfers was seldom presented and virtually never taken up.

I heard from a number of steelworkers, disgruntled with their employers, that while they were prepared to participate in workplace pensions to pick up contributions, they were uncomfortable with Tata having anything to do with their transfers. This may have had something to do with confidentiality (many steelworkers fear for their jobs) but probably more to do with a fear that Tata might sabotage their savings. When it was announced that Tata were to provide the administration to the Prudential (instead of Capita), a number of posts appeared on Facebook pages from steelworkers who’d transferred to Prudential’s personal pension, claiming they were out of the frying pan into the fire.

My observation is that many people transfer to get a clean break. This is born out by conversations with providers of streamlined SIPPs such as Evestor and PensionBee, whose customers cite a wish not to be a deferred member of a former employer’s workplace scheme (often out of disgruntlement).

Non- workplace pensions play an important part in helping people to “own” their pensions, many people do not think they have full ownership when in an employer or former employer’s workplace pension.

Do you have any comments on the impact of regulated advice on consumers’ ability to understand and assess their pension throughout the product lifecycle?

The use of the phrase “their pension” in this question is interesting. If people understood what they were saving into or transferring into, they might well think it would be providing them with a pension. Of course it is not. It might provide with a flexi-access drawdown or might be swapped for an annuity, but the personal pension is not in itself providing a pension (nor are most workplace pensions for that matter – even master trusts).

When even the name of the product is misleading, it is not surprising that most people don’t really understand what they are saving for or how the “product lifecycle” really works. While a lucky few savers have an adviser for life, most people will have a series of advisers as advisers move jobs, get promoted or retire. While they may have an understanding of what they are doing at outset , too often the strategies selected for non-workplace pensions end up as “set and go”, rather than the dynamically advised lifecycle strategies promised at outset.

I am more confident in the guided pathways of the lifestyle approaches in workplace pension defaults than the promises (however well made) of advisers. My concern is more for the mass market of people who transfer large amounts from DB pensions, than for High Net Worth SIPP owners who – like me – are au fait with the risks.

Do you have any comments about whether certain funds are seen by consumers as default arrangements and whether these should be subject to additional standards and protections?

The most common perception of a default is with the with-profit fund that pays a bonus that appears very much like a guarantee. Of course it is not a guaranteed bonus but that’s how many savers described what they were promised from Prufund and equivalents.

Steelworkers told me they liked these funds because they were “guaranteed” by a household name. There was a suspicion that some were complicit in going along with this talk knowing full well they had rights of restitution if they were let down.

There is a moral hazard at play here (it will be the same with CDC) and I fear that many advisers do too little to downplay the misconceptions. The sales targets on advisers , and the need to sell in bulk, can all too easily lead to dumping smaller or less-savvy savers into default arrangements so that more valuable and more demanding customers can be given full attention.

However, most of the streamlined SIPPs I have looked at, use defaults sensibly and promote them responsibly. They should not be tarred with the same brush.

Do you believe that demand-side weaknesses are present in the market for non-workplace pensions? Do they apply across the market or are they specific to particular consumer groups, products or sales channels?

I have partially addressed these questions in previous answers. The abolition of commission has undoubtedly changed most salespeople into advisers and has improved the quality of the “sales-side”. Where “selling” persists, it is less overt.tideway lbg

Above is an advert sent to a Pensions Manager of a large DB scheme, showing how a sales organisation can advertise itself to fiduciaries as an employee benefit. An actuarial practice – of which I am a Director – has seen examples of firms actively promoting transfer advisers to staff as an employee benefit, in practice it is also a helpful way of “de-risking the balance sheet”. I worry that what looks like a sheep, could well be a wolf.

In the case of Tideway, I have seen statements in the press and in advertisements that strengthen those concerns. Tideway and most other firms operate a conditional pricing structure where advisers are remunerated when a transfer is completed and typically invested in Tideway managed investments.

It seems to me that there are demand-side weaknesses that such firms are preying on. Pension Managers and Trustees are susceptible to advertisments of this type and employers are only too pleased to see pension liabilities transferred at a discount to book value.

Many trustees are now offering CETVs on benefit statements and at retirement. This excites demand for what look like telephone number cash benefits. It is only too easy to see how this can create the kind of feeding frenzy we saw in Port Talbot. I have meetings with three large pension schemes (with assets in excess of £12bn) on this issue in the next two weeks..

In direct answer to this question, the principal concern has to be around vulnerable customers with large amounts of investable cash. The DB transfer issues presents exactly that scenario.

There is a serious issue here which needs to be addressed by the Pensions Regulator and the FCA jointly.


Do you have any comments or evidence relating to our discussion of SHPs?

If there is market failure, it is not with stakeholder pensions. They failed to sell in great enough numbers to be a central focus of this study and those that were sold, were generally sold fairly. I was at Eagle Star/Zurich at the time when SHP was launched and saw some evidence of abuse (though not from Eagle Star/Zurich).

The issues are about the practice of hiding charges in the asset price – depressing performance while declaring an ostensibly low AMC. This is an issue being looked at by the FCA’s IWG and is one for IGCs who should consider now workplace and workplace SHPs as a single item.

SHPs provided a guarantee on pricing which in itself had a price. Whether the price paid for the stakeholder guarantee is worth paying is worth consideration. In my opinion, consumers are getting little from stakeholder pensions that couldn’t be provided more cheaply by the better SIPPs and personal pensions. There is an argument for disbanding SHP but -when do much more pressing issues abound, it is a weak argument

Can you provide any relevant comments or evidence relating to charges on pre-2001 policies?

No. I will leave this to the IGCs and GAAs, who I hope will be contributing to this discussion.

How might we and industry improve non-workplace customers’ awareness of the charges they may or will incur and the impact of those charges on their pension savings?

The most effective awareness campaigns make the impact of poor choices graphic (think the HIV/Aids campaign and advertising on cigarette packets. We can do more to show how the impact of costs on a pension saving plan, can reduce the outcomes. There is a difference for instance in the standard of holidays/cars and other consumer durables that arises from price and the ability to meet it”. I would like to see cost disclosure promoted by regulators in a more outcomes focussed way!

The OFT agreed with insurers that IGCs could provide people with value for money assessments. This has been extended to cover trust based DC schemes. But we have yet to see any proper system for measuring value for money. Instead we get IGCs and Trustee Chairs trotting out the statement “in my opinion we are providing value for money” as if this might help.

The only way such a statement can be meaningful is if it answers the policyholder or member’s question “relative to what?”.

Since there is no coherent system of measuring value for money or independent means to benchmark it, members are entirely let down. We need an independent and public utility (as there are in Australia) to compare workplace and non-workplace pensions for value for money and such a utility needs to use accurate performance data, accurate risk measures (standard deviation) and accurate costs (including hidden charges).

If we were able to see the true costs of some of the non-workplace solutions made available to vulnerable investors, if those costs could be displayed against those of alternatives and if the impact of those costs could be displayed in relation to holidays /cars and other tangible outcomes, then the kind of awareness of charges (and value) that we see in more mature DC environments, could be quickly created in the UK.

Do you have any comments on how industry might better support consumer choice (including monitoring and identifying when it might be appropriate to switch to a more competitive product and / or provider)?

The system of benchmarking (using a public utility) is the initiative that I would recommend. It should be available on every pension dashboard. The workplace pension providers should co-operate in facilitating data and IGCs and Trustees should supervise this.

Allowing people to see if they are getting value for money and explaining its importance is an important step along the way.

Once we have an awareness of the importance of getting value for money and an idea on where it is to be found, then we need a free and easy way to move money from one part of the system to another. I note the comments in the discussion paper on this. I am sure that at the top end of the market, re-registration systems are important, but for the mass market, this means transferring money from one provider to another using unit encashment.

The only research I know of as to how effective the market is , is provided by Pension Bee’s Robin Hood Index. Currently it shows that the majority of workplace pension providers are using the Origo system and that the market is functioning if not perfectly – at least a lot better than it has done. However it is clear that some workplace providers – most notably NEST, are not releasing money in a reasonable timeframe and hiding behind phrases like “due diligence” to hang on to pots. There appears to be one insurer- Aegon -which is making life as hard for transferring policyholders as possible.

The work of Pensions Bee in publishing a league table of the good and the bad, is really helpful, especially as they are using proprietary experience which is evidence based.

The Robin Hood Index should be taken up and promoted by the Pensions Regulator and the FCA as precisely the way to get us to universal good practice sooner.

Can you provide any evidence or examples of where competition is not working well on non-workplace pension charges (applicable across the market or specific to particular products)?

I would like to include with this proposal, evidence of a market failure that is causing misery to many people involved. At the time of writing I have been presented with a twelve page legal letter threatening me with a defamation writ if I publish this information.

Since I don’t want to go to court, I have only one alternative, which is to withhold the evidence that I have.

It is a shame that those people who try to expose bad practice, I cite Gina Miller, Chris Sier as examples, are pilloried for doing so. The resources of those who manage our money are substantial and those who monitor them meagre.

There is a great asymmetry between the information available to those who manage our assets and we who own them. This asymmetry is not healthy, it can lead to bad management, poor outcomes and – in extreme cases – outright fraud. The answer is transparency of disclosure, benchmarking of value for money and the creation of a proper awareness of the impact of charges – by all.

The vast majority of the evidence I have of anti- competitive practices and high charges relates to SIPPs where mutton is dressed as lamb and the victims are those with a large amount of (ex DB) money and a low level of financial literacy – in some cases any kind of literacy.

Summary and next steps

We would like to understand whether and how providers’ oversight arrangements differ between workplace and non- workplace pensions.

This really is a matter for you to judge rather than me to comment. I publish each year a summary of the IGC Chair Statements together with a ranking of each statement in terms of clarity, effectiveness and depth.

I would like to do the same for master trusts and non-workplace providers but it is too much for one person to do.

I would make the general observation that best practice is often found in odd places. Who would have thought that Virgin Money would have such a good IGC while other household names repeatedly trot out bland banalities and dress up marketing information as value for money metrics.

The master trust chair statements are almost impossible to find and are published at odd times of the year – presumably with the intention of getting read by the least possible number of people!

There are exceptions – but they prove the rule that workplace pension oversight arrangements are currently operated in a bubble, and that the only people who get involved in them – are the people who are paid to do so.

There are, I am sure, good things going on behind the scenes, but it will not be until these workplace pensions start publishing real information on the value for money of their core products, that they will be working properly.

I see no reason why IGCs should not have equal oversight of non-workplace pensions as they do of workplace. I note with approval how my non-workplace pension transfer values improved when I reached 55 and they no longer contained transfer penalties. I thank the IGC of Zurich for making this happen for me.

The work they have done so far could be extended, as has been indicated in this response. But by far the most important function of IGCs and Trust boards is to protect their policyholders and members from poor value for money.

In the context of the potential harms in this market, are there any other interventions that you think we should consider? Please explain what the impact might be and why such remedies would be appropriate.

I have referred in this response to the difficulty I have in publicising bad practice. I , and others , find it hard to whistle blow using Project Bloom, not least because we get no feedback from Action Fraud and the people we are trying to protect get help too late.

If we go public we can be criticised for “tipping off” and are sent legal threats from those we criticise. We are vulnerable to being censored by our employers or (for IFAs) – networks. In extreme cases we can be stopped from working.

It seems to me that the system of public censure and self-regulation that we have in this country is based on free- speech.

I would like to see the FCA and other regulators supporting whistle-blowing (though censuring slander and libel). At the moment, it is too hard to speak out and for that reason, many bad practices are allowed to persist. The Port Talbot experience is only one example.

I welcome the FCA’s recent interventions in the market, especially around transfers from DB plans and will work with them wherever I can to ensure better advice and better outcomes for people in DB schemes (and out of them).

Do you have any other comments on the matters discussed in this Discussion Paper?

I have stated publicly (henrytapper.com) that I support the aims of this paper and congratulate the FCA for its simple and effective format. It addresses the main issues, has a good market summary and I enjoyed reading it and responding to its questions.

I hope that others will respond to it and that it provokes action within the FCA and other regulators.

I would be happy to discuss any of the matters contained in this response with the FCA and others.

Henry Tapper ; for the Pension PlayPen – Feb 4th 2018

Posted in advice gap, BSPS, dc pensions, drawdown, Henry Tapper blog, pensions, PLSA, Retail Distribution Review, Retirement | Tagged , , , , , , , | 1 Comment

£400bn reasons for better practice. The very odd world of “not- workplace-pensions”.

£400,000,000,000 is a lot of money. It’s the amount that sits in “not workplace pensions”.

“Not workplace” is what we call that great hinterland of individual pension pots that are labelled stakeholder pensions, personal pensions or self invested personal pensions.

Now the FCA are turning their sites on these forgotten policies. Discussion Paper DP18/1 “Effective completion in non- workplace pensions” aims to shine a light on what’s going on with our private savings. This is what the OECD is called the third pillar, and it’s a very odd pillar indeed!

The paper starts with a review of where this money sits , or at least what the “value chain looks like.

value chain

Anyone familiar with my recent blogs will recognise the bottom row. Far from creating value, the RDR has  spread opportunities for fee charging. Ordinary people are finding themselves signing up to discretionary fund management agreements without proper understanding of who is managing their money and how much it is costing them.

Where the individual personal pension was a licence to take commission, the new SIPP is a licence to take fees, while commission was charged against contributions, fees are charged to the fund.

Meanwhile, the paper points us to the world of workplace, an idealised world of large schemes where the employer picks up the majority of the fees.

value chain 2

Not that black and white

To suppose that workplace is a nirvana of subsidised services while non-workplace a barren wasteland is entirely wrong.  Figure 4 (above) is taken from a survey of 144 large DC schemes run by members of the PLSA. These schemes are as gold-plated as DC plans get and are generally aspiring to PLSA’s Pension Quality Mark. But the generality of workplace pension arrangements are paid for almost entirely by the members, the employer picking up the cost of auto-enrolment compliance.

Meanwhile , a new breed of streamlined SIPPS such as those run by Pension Bee, Evestor and the forward thinking insurers such as Royal London, members are being offered the kind of pension most workplace pension providers can only marvel at.

This new breed of SIPP is setting new standards in terms of customer service, embracing our new world of digital interfaces, offering instant access through our phones to services that still take the workplace pensions days to provide.


It is the best and worst of worlds

So just as the shift from personal pensions to SIPPs has given the opportunity for fee gouging, it has spawned a new kind of competition. The PensionBee Robin Hood index is an example. Not only does it shine a light on bad practice, but it enables progressive SIPP providers to put pressure on workplace pension providers such as NEST and Aegon, who are conspicuously failing customers, especially when customers try taking money away.

It is not just Pension Bee that has suffered from the bullying culture of the “pensions industry, regular readers of this blog will find that some of the blogs on what I consider SIPP malpractice are missing, they can draw their own conclusions.

But the old world of legal threats and deliberately obstructive transfer practices is not one that sits well where social media shines a light. The transparency agenda is made possible because organisations like Pensions Bee are no longer dependent on Aegon and NEST. RDR has its successes and the new streamlined SIPPs are as a much a pointer to the future as the activities of some advisers in Port Talbot are a pointer to the past.

£400bn is a lot of money.

It is high time that the FCA got to grips with “not workplace pensions”. They represent the best and worst of what is going on today.

Reading  Discussion Paper DP18/1 “Effective completion in non- workplace pensions”, makes me want to respond to it,  It is a sensible document that is in the interest of FAMRs population. The FCA are reaching out to the trustees of occupational pensions and it’s important that those trustees reach out to them.

£400bn is about 40% of the value of the funded part of Defined Benefit pensions, it is a huge amount of this nation’s wealth. Just what will happen to this money is open to conjecture, though it has received pension tax-relief, it is unlikely to be paid as a pension.

Some of this money should properly be considered wealth, the majority of it is pension saving from ordinary people who are neither wealthy or desirous of freedoms.

This discussion paper is nicely time to coincide with the Work and Pension Select Committee’s investigation into the Pension Freedoms and subsequent inquiry into CDC. Let’s hope that these various discussions can be brought together for the common good!






Posted in pensions | 1 Comment

How certain are my client’s state benefits?

death and taxes

The old adage “there’s nothing certain except death and taxes”, sadly did not include pensions, not even the state pension. Behavioural science suggests that the further we look into the future , the more we crave the security of certainty. But life (and death) aren’t like that and anyone who has ever conducted a cash flow forecast knows they are putting their finger in the air.

While we can philosophise  about the “ineluctable modality of later life”, that won’t get us very far. People crave certainty and relative to other sources of retirement income, the state pension comes up with it. If you go to https://www.gov.uk/check-state-pension and input your Unique Tax Payer Reference , you will see something like this.state pension ht

This is my amount, I can expect a pension from my 67th birthday but this is not guaranteed. As the WASPI women have found out, the date at which state pensions are payable is a moveable feast and it moves with the Government’s estimate of life expectancy for all of us (us= Uk population).

The WASPI women expected to retire earlier than men and they’re finding out that that advantage has been taken away from them. This is because of UK and European law which requires state pensions to be equalised. During the last 30 years , the law has changed. Generally the law has changed for the betterment of women, but in this case it has worked for the worse. Our retirement finances are subject to the vagaries of the law and this is one reason we must keep our fingers crossed.

Can I be sure that the Government won’t push back my retirement age (as it already has)? Well no! But the closer I get to my State Retirement Age, the less likely is it that I’ll have to wait longer. There is still a corridor of uncertainty but that corridor is getting narrower! The WASPI women claim that they heard about their having to wait longer too late and that the Government hid this information from them. They have some grounds to be aggrieved, part of the contract Government has with all its citizens is to keep them informed.

Nowadays we have to keep ourselves informed -or if you are a pensions adviser – help your clients inform themselves. Things are liable to change and it’s not just the “when”, it’s the “how much”. At the moment, that £159.55 is good only for this year.

The rate of basic State pension is increased from April each year by at least the level of growth in average earnings. The current Government’s policy is that the basic State Pension will increase each year by the highest of:

  • growth in average earnings
  • prices increases
  • 2.5 per cent


For instance, in tax year 2016/2017 the basic State Pension rose by 2.5%. But in April 2018 it is likely that price increases will be in excess of 2.5% and earnings growth even higher. This is known as the triple-lock; you are guaranteed (for as long as the triple lock survives) an increase in your state pension entitlement of the best of the three numbers bulleted!

It would be good if we knew what inflation was going to be and it would be good if we were to know the triple lock would last for ever. The truth is we don’t know either of these things. We can only guess.

So far I’ve been talking about what I know about myself, the forecast in this article is my forecast. If I scroll down on my forecast I find out more interesting information about me. I discover that the amount I can expect is dependent on my contributing more national insurance.

state pension ht 2

To get my final £14.20 per week, I need to work for another four years. That’s because I spent some of my life not contributing enough national insurance. I don’t owe money, I was contracted out of the state pension and so currently only have 31 out of the 35 complete years I need to get my full entitlement.

state pension Ht 3

It looks like the 11 years when I didn’t contribute enough, gave me two full years credits, so I have the equivalent of 31 years national insurance contributions.

This is really helpful to my retirement planning. It tells me that I have every chance of getting to my full state pension , despite being contracted out of the second state pension (what used to be called SERPS) for a number of years.  This certainty I have in numbers.

Talking people through their entitlement to the State Pension is an incredibly important and rewarding part of our job. People who I do it for, are really grateful, especially when I explain the small print and put their expectation in the context of others. If you advise others, then make sure your clients have their HMRC User ID and password to hand (and an internet connection handy) when you do!

You’ve never had it so good  – the politics of the state pension.

The idea of the triple-lock would have been unthinkable for much of the past fifty years. Wage and price inflation have been far too high for far too many of these years for such a promise to be affordable. The triple lock was introduced in 2010 by the coalition Government. It is proving very popular, especially by those in retirement (who are good at voting).

In its quinquennial review of the national insurance finances in 2014, the Government Actuary made it clear that the triple lock was not affordable for ever, the triple lock was -to GAD- a way of getting the State Pension back up to a level where it provided everyone with a minimum safety net in retirement. We may feel that £8,325 pa is too little to live on, but it is a lot more than could have been expected – even in 2010.

The Government Actuary points out in his review that “private sector provision” and in particular its increase due to “the impact of auto-enrolment” and the “pension freedoms

“could open up consideration of phasing options starting in 2020 for securing greater sustainability of State Pensions and the National Insurance Fund”.

This is a coded way of saying that provided we are saving more, the Government could turn off the triple lock by the end of the decade.

We may look back at this decade as the “good old days”, at least for state pension. The clear message for your clients is that none of us expect the state pension to increase into the next decade as fast as it is at the moment and that the nice surprises we get when we revisit the state pension portal, are unlikely to last. There is some certainty in that.


What else can you expect from the state?

Most people who can afford to pay for financial advice , will be dependent on the system of further state benefits in retirement , known as Universal Credit. However, the level of those benefits and how and to whom they come payable, is important, especially when – like me – you talk with people in the workforce who are on low incomes.

The certainty that these benefits being available is unfortunately low. The universal credit system is not properly understood because it is complex and often unfair. The acknowledged expert on these matters is Gareth Morgan (the Ferret). If you would like to bone-up, as I do, you can visit the Ferret website – http://www.ferret.co.uk.

To be fair to Government, Universal Credit is new and has yet to bed down, we can be reasonably certain that the current unfairness will reduce over time. Never the less, the reality for most people on very low wages is that – unless they are very careful – they could reduce their entitlements to benefits under Universal Credit, by being seen to draw income from private pensions.

It is worth reminding wealthier clients who are concerned about the uncertainties of their retirement planning, that the uncertainties for those who do not have their wealth are much greater. The increased dependency that poorer people have on state pensions and benefits in retirement are much higher than those of us with money.

There is one final point which is important, but often ignored , with regards the payment of income in retirement. Money arising from pensions , whether state or private, is not subject to national insurance and is therefore more valuable in the hand than “earned income”. This , combined with the increased age-allowance and certain un- means tested universal benefits (bus passes, TV licence reductions etc.) mean that life in older age is financially less taxing.

Are their risks from perceived inter-generational inequalities?

But, as with the benefits themselves, the taxation of benefits is not written in stone. Economists such as Paul Johnson are keen to point out the increasing inter-generational transfer from the young to the old which is sociologically and politically unsustainable. While there is good reason for Governments to reward the old , these do not include bribing them for their votes. The baby booming generation , who form the majority of financial adviser’s clients, should be aware that they cannot have it their own way – forever!

The certainty of the current benign conditions pertaining to state pensions and benefits – needs to be viewed in the light of these large “macro” considerations. in the final analysis, the nation has to ask of itself – “can we afford all of this?”. Unless we see a substantial increase in productivity (GMP) , I think we can be certain that the answer to that question is “no”.

death and taxes 2

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

If I was Theresa May….

may 8

I can understand Theresa May’s frustrations, I am a member of her party and have witnessed her “annus calamitous” up close and personal.

I am a fan of May’s, an endangered species, but I prefer her to alternative models


As a businessman, I am concerned about her threatened interventions on behalf of pension schemes. I suspect that Carolyn Fairbairn and the CBI share such concerns, ultimately companies must be self-determined, they cannot be run by their pension trustees.

Much as I would like, as someone dedicated to restoring confidence in pensions, to put pensions first, I don’t think that putting the sponsor second, is the way forward. If  integrated risk management means anything, it means both sponsor and trustee – if not in harmony – in touch.  We risk breaking that touch point if Government intervenes. We do not want the relationship between management and trustee to become mechanistic.

But I do want to see the Prime Minister exercising her authority so that ordinary people feel more confident about the pensions they are in,

A crack of light?

So while I am against Government intervening further in the delicate touch points between employer and trustee (the Pensions Regulator is quite involved enough), I do hope that Theresa May can find a way to exert her authority in other ways.Light shines on

It was not until a recent meeting I was involved with, where a group of us was discussing the need for legislative change to take forward CDC, that such an opportunity presented itself.

Royal Mail has now announced to the  London Stock Exchange that it intends to set up a CDC scheme which will pay its 140,000 staff a wage for life. The news has been greeted with some  enthusiasm by the market rm shares


The Pensions Industry’s reaction has been less enthusiastic and  is properly summed up by Tom McPhail in Pensions Age.

The plans to launch a CDC scheme will be watched with keen interest by the pensions industry, which has very mixed feelings about the viability of such schemes.”

A rather more partisan statement comes from John Ralfe, commenting in the Times.

John Ralfe CDC

There are substantial headwinds to come and the confidence the market is expressing through Royal Mail’s share price may underestimate the challenges to come.

To make Royal Mail’s plan “viable” will need energy and commitment from Royal Mail and its staff”s union (CWU). It will also need that energy and commitment from within DWP.

Friends of CDC

Putting on another hat, I am a Friend of CDC and one of our aims is to help CDC to happen.

It strikes me that Theresa May would be well advised to make CDC happen too!

  • It doesn’t need involve her with World War III with the CBI
  • It can help improve industrial relations between Royal Mail and its staff
  • It could pave the way for similar settlements in future
  • It does look good on her CV
  • It takes our mind off Brexit
  • Sorting all this out is achievable within the present context.

That last point is debatable. I have now seen sufficient evidence from sufficient actuaries and lawyers , to support this view, but I admit that I am not the expert. I take others word for it – on trust.

Fortunately, I am not the only Friend of CDC, there are others, who are trustworthy and articulate and energetic and who are acting pro-bono as they want to restore confidence in pensions too.

In the gloom the gold gathers the light about it.

It  would be very helpful for Britain if we made 2018 something rather better than 2017 and I do not subscribe to the view that this would  best be achieved by kicking the current Government out.

I still believe that Theresa May is our best bet for a way out of the current complexities. Unfortunately she presides over a party which is denuded of pension expertise and is therefore floundering on the pensions front.

So I rather hope that somewhere in the serried ranks of civil servants and politicians, there is a person who can whisper in the Prime Minister’s ear that CDC might well be her best bet.


lux in tenebris 2

Lux in tenebris

Posted in CDC, pensions, Royal Mail | Tagged , , , , | 3 Comments

A finger of fudge is not enough!


That was then



The fudge that is “guidance” is top of the list of Ros Altmann’s priorities. She’s even written a letter to the Pensions Minister.

I wish that she could turn her mind to the 140,000 postal workers who don’t want guidance or advice, but want a wage for life from their retirement savings.

Not enough

Yesterday morning, 60 people attended a meeting of the Friends of CDC, so many that our room was full to busting. We had insurers from Germany, civil servants from Whitehall, pension managers from the City and the odd front bench MP, thinking about the hardest, nastiest problem in finance – how to provide an income for yourself for the rest of your life.

We didn’t discuss guidance.

Give me freedom from these freedoms!

For the workers at the Royal Mail, the prospect of having to confront the hardest nastiest prospect in finance with the help of guidance or advice was not appealing. They had been promised a pension – a wage for life- and they had been prepared to strike for it.

Our meeting was looking at the tough choices that need to be made to satisfy them.

It is becoming clear to me that though “many flowers bloomed” in Steve Webb’s garden of “Defined Ambition”, only one crop can grow in the austere Brexit-dominated legislative landscape of the next three years.

I am not talking about abolishing freedoms, nor of reinstating annuities. I am talking about allowing a group of workers a third choice.

The talking at yesterday’s meeting was tough. There is no miracle cure that will solve all ailments , what can be produced  in reasonable time , may be no more than a crude remedy. Many of the problems that ordinary people have with their DC pots, may have to wait. A universal solution (as ambitious politicians have found universal credit) causes as many problems as it solves. Reform of our pension system is not going to be wholesale- it may have to be local – it may have to trial solutions.

I do however believe that the postal workers need more than the “finger of fudge”, that Baroness Altmann is chasing disappearing rainbows and that what Terry Pullinger and his union want for his workers is a practical means of turning pots into pensions.

No amount of guidance can do that. Many people having been offered freedoms, are saying no thanks. DC pots are not enough, people want freedom from the bondage of uncertainty inflicted on them by the “hardest, nastiest problem in finance”.

Not guidance, not advice but a “wage for life”.

So this blog calls , and will continue to call on Government to address the needs of the many and put aside special pleading. This blog calls on Government to help the postal workers to a resolution of their differences with their employer, by granting them- and their employer  – a mutually agreed means for the workers to get a wage for life in retirement.

No guidance – no advice – no dashboard needed – a wage for life for a lifetime’s saving.

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BSPS – a big win – but at what cost?

BSPS Missing.PNG

Despite the success, many members of BSPS will be “missing” from the new scheme


It now seems quite certain that the New British Steel Pension Scheme will happen and that it will be populated by the majority of members of the current British Steel Pension Scheme. In announcing the results of “Time to Choose” Allan Johnston, Chair of BSPS Trustees had this to say.

I am pleased that so many Scheme members took the time to choose the outcome that was best for them based on their personal circumstances. The New BSPS offers benefits that for most members are the same or better than the PPF and around 83,000 members have chosen to switch to the New Scheme.

The PPF provides a valuable safeguard for members of occupational pension schemes and around 39,000 scheme members will remain in the current scheme when it starts its formal PPF assessment period at the end of March unless they take a transfer.  Their benefits will be aligned to PPF compensation levels.

Work is now under way to allocate the members and scheme assets between the new BSPS and the old scheme. Central to this work is the requirement to ensure that, from 29 March 2018, pensioner members receive their appropriate pension payment depending on which arrangement they will be moving into. 

Further information will be provided to all members ahead of the split taking place on 28 March 2018.

It is the mark of a good Chair to always be right in public, but to be furious in private! If I were Allan Johnston, I would be just that.

By a strange coincidence, I met my investment hero, Hugh Smart for the first time last night. For all his suave charm, he made it clear that the last two years have been the toughest of his working life. Hugh was in 2016 (when SSgA stopped doing the numbers)  the undefeated CIO of the world, his investment record impeccable.

That Britain, a proud industrial nation with a booming motor industry, came so close to abandoning its capacity to produce steel is remarkable, that Britain’s #1 pension scheme in terms of its cost controls and investment track record, should have come so close to entering the PPF even more so.

If you want to understand the implications of the deal done by the Trustees, here is an excellent Q&A that was published last night in the Teeside Gazette. It is also worth looking at the wonderful gallery of images from the Teeside works over the years

Allan Johnston’s achievement, was made possible by Hugh Smart’s asset management, but it is fundamentally the Chair who has carried the weight of the past two years. Well done to the Trustees of BSPS for keeping afloat in the stormiest of waters.

But there are lessons to be learned

The problem that a strong chair has, is that there’s no one in the Court to criticise him. Even if the Emperor had had no clothes, he’d have been admired. I’m seeing Allan next week, a meeting I’m looking forward to for a number of reasons, not least because I am not in his Court and will be able to read to him this comment on the “Trustee’s best effort” (received in response to the announcement above)

Sending out 16/30 page packs of difficult to read documents and reminder letters to everyone even if you had already voted.

Not providing a panel of regulated advice to tell you the best option because they were so frightened of losing their impartiality.

Wording an option “I want to move with the current scheme…”

Not allowing email submissions or opting on-line.

The failings of Time to Choose were visited upon the members, but the same member who wrote this criticism could also post on the BSPS Facebook page

Applications do take time to process and most remain in the statutory payment period of 6 months after the original CETV guarantee date (eg september for dec 11 extended to jan 26 submission). It is very frustrating and we hope the message Rich got will at least take away some of the panic.The pensions office are not trying to prevent you getting your transfer but no one has handled this size of RAA before and in parallel with the transfers they are getting all the data ready for the PPF/BSPS2 split which is another mammoth task.

I am not apologising for the Trustees but just trying to put some truth to what is happening.

Institutional winners and individual losers

Just as the transfer of 83,000 members is a triumph, so the loss of 39,000 members to the PPF will include some minor financial tragedies.  I have been told that the trustees got well over 100,000 responses but there were lots of duplicates and changes of mind so the final figures  in this statement are on the conservative side.

Just under 97,000 members completed and returned option forms, of which 86% were from members choosing to switch to the New BSPS and 14% were from members choosing to move into the Pension Protection Fund.

But 25,000 people never returned a form. And counted among those who elected to join BSPS there are those who have made elections to transfer and are awaiting their money.

Citywire report today that many of these transfer requests may not be met from BSPS. How much of this is hearsay and how much fact is open to question. What isn’t open to question is the worry that the waiting is causing.

Here are two postings on the Facebook pages which demonstrate the stress that Time to Choose has put these steelworkers through

A lot of us only chose bsps2 so we could utilise the extra time needed to meet the artificial deadline forced on us, given the farcical response, and response times, of the cetv requests…..

and poignantly

Another day hoping and praying that Mr Postman will drop a letter through my door and it will say that ‘Mr …. , your pension has been transferred’ Alas no 😦 Its only been 145 days or 20.7143 weeks since my FA sent my forms off

This is not to mention those steel workers who find themselves – having transferred- in arrangements manifestly unsuited to their circumstances

In the final analysis , this is a war that should never have been fought

The battle to wrest a scheme back from the PPF was a battle that should never have been fought. The Trustees have won that battle at such cost that they may have lost the war.

This is why – were I Allan Johnston, I would be openly proud and privately furious. It was never the intention of those who set up BSPS and ran it so well for many decades, to have members posting comments like this.

As it is now over three months since they were authorized to send them can someone please tell me where I stand in regards to claiming as they have cost me possibly tens of thousands. Am shaking with rage as I type this.😠😠😠😠😠😠😠

and finally this

Well thats it, waiting game is over.
Transfer not accepted.

These are bodies lying on the battlefield. We can sit and read this , but we have no idea of the pain that these comments attempt to express , and for what?

We cannot continue to fight these kind of wars and leave the people we are trying to help in such a state.

I am sure I will read many analysis’ of the BSPS numbers , but my thoughts are with those members who have had their working and social lives disrupted as they have been.

Let’s hope that it can be done  better – the next time a scheme goes into an RAA.

BSPS hartlepool

The way it was

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

PensionBee stands up to the bullies at Aegon.


“Think three months is too long to wait for your pension? So does Aegon CEO, Adrian Grace – especially when it’s his pension.” – Professional Adviser 03/15

Let my people go

This story begins with an interview between Adrian Grace, CEO of Aegon and Professional Adviser. Grace tells Laura Miller

“The old world doesn’t work anymore. We believe that by agitating the market, there will be more business for advisers and so more business for us compared to those that will sit on their hands.”

and cites a personal example. Grace had been waiting three months to transfer his pension benefits from one provider to another. Grace concludeschange

At Aegon – nothing much has changed

Fast forward to the autumn of 2017. Pension Bee is publishing the Robin Hood index which identifies which providers are good at taking your money and which are bad at giving it back. All the major insurers are using the Origo platform and all conforming to its 12 day transfer standard. All that is except Aegon, Adrian Grace’s insurer is still taking 38 days (on average) to complete a transfer.

This is not good enough for Pension Bee’s CEO , Romi Savova, who pursues Grace and the Aegon IGC (Chair- Sacker’s Ian Pittaway) for improvements in service. None are forthcoming. By last week Romi has had enough

An open letter to Adrian Grace, CEO of Aegon UK

Dear Mr. Grace:

I am writing to you about our ongoing concerns for people transferring out of Aegon policies. These now impact c.600 customers. I am requesting the immediate resumption of electronic pension transfers between our firms.

I have opted for an “open letter”, as Aegon will not meaningfully engage with us despite direct letters to you, your Independent Governance Committee and various other Aegon employees. I point out that our Chairman, Mr. Mark Wood, has repeatedly offered to meet you in Edinburgh to discuss this matter but has been rebuffed – indeed on one occasion, a planned meeting was cancelled without notice.

Aegon’s arduous transfer approach for our mutual customers is out of line with that of its peers, who enable customers to switch their pensions quickly and safely to their chosen provider. Our experience in completing over 10,000 transfers is that best-in-class providers, including Aviva, Legal and General, Prudential, Scottish Widows and Standard Life, typically transfer electronically in 12 days or less.

In contrast, since 8 June 2017, customers wishing to transfer out of Aegon to PensionBee have faced barriers to switching, including multiple discharge forms, telephone calls and repetitive requests for information that has already been provided. There are various other steps that impede the customer’s right to switch pension provider easily (please see here). The average transfer out of Aegon for completed transfers now takes c.54 days – although the true scale of detriment remains unknown, since many people have been unable to overcome the barriers placed in front of them by Aegon in their attempts to switch or have simply given up.

This is all extremely puzzling as prior to 8 June 2017, Aegon readily used electronic means to transfer the policies of over 300 customers to the PensionBee Personal Pension.

I note that your communication to our mutual customers refers to due diligence and the importance of preventing transfers to pension scams. I wholeheartedly agree that this is an important aspect of any transfer decision, but Aegon has not clarified to us any specific due diligence concerns that it has regarding PensionBee. More importantly, I am concerned that bombarding customers with impersonalised pension scam warnings will lead to such letters being considered as red tape. The consequence may be that some people ignore genuine red flags when transferring to an actual pension scam.

Although I have already sent you this information several times, I will include it here again for completeness:

  • PensionBee, established in 2014, is authorised and regulated by the Financial Conduct Authority as a pension provider and we have our own wrapper
  • The PensionBee Personal Pension is an HMRC-registered personal pension and no unauthorised transfers or withdrawals are permitted from the scheme
  • All underlying investments are provided by BlackRock (Aegon’s primary asset manager), Legal and General Investment Management and State Street Global Advisors, who is our largest external shareholder

As you will know given my letter to the Financial Conduct Authority, I do not believe Aegon’s approach to transfers-out is Treating Customers Fairly. It doesn’t help the millions of people who have been auto-enrolled consolidate several small pension pots. As I’m sure you know, TCF’s Outcome 6 requires that “Consumers do not face unreasonable post-sale barriers imposed by firms to change product, switch provider, submit a claim or make a complaint.”

As a result of unfair treatment, some customers who have completed transfers have begun or are considering taking Aegon to the Ombudsman for compensation. Our records indicate at least 56 customers have already complained to you (although our understanding is that many more have come to you directly) and that you have compensated some of them due to admitted errors in your processes.

I thought it would be helpful for you to hear some of the complaints in the customers’ own words, as I appreciate resolving this situation may not be on the top of your very long to-do list.

Customer 1

“Whilst I appreciate your role in minimising pension fraud and advising me to make considered decisions, I now find your actions to be deliberately resistant and are designed to fatigue me in moving – something I will be highlighting to the FCA and FOS.

I have moved 2 other pensions from Scottish Widows and Legal & General to Pension Bee and this process was completed within 30 days. This current process is taking more than 3 months.

You write and continue to advise me to avoid pension scams. I have researched the company I am moving it to and will again confirm the below

  • They are regulated by the FCA – whilst capital is at risk- it provides the same level protection as you do.
  • The two funds are with State Street and Blackrock – with billions under management
  • I understand the fees may be more- and am happy to pay the small (0.1%) increase due to the better online dashboard
  • They have a strong trust pilot score from existing users

Had I requested to move my funds to a small start-up in China or an investment vehicle that provided inflated returns, you would be right to challenge. Pension Bee have not provided any short term unrealistic claims and have been able to show what funds might be available at 66 years old.

Furthermore, their website has helped me identify shortfalls in my current saving plan for the yearly amount I wish to live on in retirement.

Your actions on the other hand are now boarding on bullying/scare-mongering and domineering in threatening not to release my funds.

I have completed numerous questionnaires, provided proof of identify and I am asking one final time for this transfer to be completed.”

Customer 2

“You will be amused to note that Aegon seem to think that PensionBee is a fraudulent scheme, despite having already transferred two of my schemes to it already.”

Customer 3

“I’ve received your letter dated 12 July enclosing a 4-page “due diligence” form, which you appear to be requiring me to complete (together with providing supporting documents) as a condition of complying with my instruction to transfer the pension fund to another FCA approved pension scheme. I’m an experienced lawyer who used to advise on pensions law and I fail to see what purpose is served by this form. I’d be grateful if you could refer me to relevant clause(s) in the Trust Deed or Scheme Rules which entitles you to refuse to execute my instructions unless I complete such a form.”

Customer 4

“What more due diligence checks are required?? I have completed all these forms already and advised your adviser I am happy for the transfer to proceed?

In terms of seeking financial advice this is not required below £25,000 and since my funds are just over £400 I will NOT be doing this.”

“What do I have to do to get my money??? This is ridiculous!!”

Customer 5

“I have responded to Aegon recently as they sent me many complicated forms which I did not understand. I wrote them back advising they need to allow PensionBee access to my funds. Please contact Aegon to confirm and advise when this has been done please as I would not like to have to complete the confusing forms they sent me.”

Customer 6

“Aegon are being real pains in the neck about my other pension transfer. I had to fill in a long form, have had two calls (asking the same questions), emails telling me if I don’t reply they’ll cancel the transfer (I replied) and now they are asking my to fill in a Discharge Indemnity Form with clauses like the ones pasted below.

They say if I don’t fill it in, they will cancel the transfer. It seems to be one thing (excuse) after the other. In your experience, is the latter normal? And, legally, do I have to fill in the indemnity form?”

Customer 7

“Yes, please proceed with this transfer! I have instructed you to do so on several occasions. I have completed an exhaustive questionnaire and also taken a call and been through all the responses again!

I cannot make myself clearer, I want you to proceed with this transfer as soon as possible. I believe now Aegon is being obstructive in delaying to do so. You can see that my receiving scheme (PensionBee) is bona fide and there is no reason now not to proceed.

I have carried out all my background checks, and am fully informed of all the facts. I have worked extensively in the financial services, investment and retirement planning sectors. Please remember also that this is my money, not yours, and I will decide what to do with it.”

Customer 8

“I have just been on the phone for what must be the 9th time now regarding my transfer of both pensions away from Aegon. I was actually speaking to a rather helpful colleague of yours [redacted] who send over yet more forms can you believe.

However over the last 4 months, I have been treated appallingly and you have left me no choice but to complain through the proper process for my unnecessary time spent trying to transfer both my pensions to my Pension Bee portfolio.

The word “Disgusted “ doesn’t even come close to the way I feel about Aegon, having had the displeasure of dealing with your company. Back in September 2017, Aegon received an instruction from Pension Bee along with 2 other pensions of mine (Aviva and Scottish Widows) both of which were transferred within 6 weeks without any hitches all online. Not even a single phone call was required on my behalf.

Aegon, on the other hand… Well, where do I begin?

I have filled out identical sets of forms twice , even 3 times in one instance, emailed several times, rang the customer service centre. Altogether I have spent an estimated 10 – 12 hours of my life trying to transfer my pensions.

I charge £30 per hour for my time so you leave me no option but to send you an invoice for my loss of earnings due to gross incompetence.

I am not sure why you choose not to employ electronic means for your pension transfer protocol. It beggars belief that in 2018, you will not embrace change and act like Luddites. All that is achieved is the alienation of your customer. I for one can honestly say that I nor my friends and family would ever recommend Aegon.

As a goodwill gesture, I expect Aegon to recompense me for my loss of earnings, through full payment of the attached invoice. I believe this is the very least you can do. If you choose not to offer me an equivalent form of recompense then I will have to follow legal proceedings for my loss of earnings.

If you cannot solve my complaint within the next 4 days, Please provide me with the contact details for the Financial Ombudsman to escalate the complaint.”

End of sample customer feedback

It is difficult to understand why Aegon treats its customers differently to other providers, who are all transferring electronically to the same FCA-regulated PensionBee pension plan. I look forward to your response or better still, the resumption of electronic transfers between our companies.

Yours sincerely,Romi Savova

Romi Savova

Chief Executive Officer

PensionBee Limited

Three questions

  1. What makes Adrian Grace think he can get away with this kind of behaviour?
  2. Why has Aegon’s IGC – under the Chair of Ian Pittaway, not got involved.
  3. What are the FCA going to do about Romi’s complaint of corporate bullying?


Are we being served?

I suspect that not even “young Mr Grace“, could claim that Aegon have “all done very well”.


Posted in advice gap, FCA, IGC, pensions | Tagged , , , , | Leave a comment

No shortage of “pension engagement” at Royal Mail.

Pension people want positive engagement, but when they get it, they ignore it or deride it.

On Friday, the CWU announced that an agreement had been reached between CWU and Royal Mail which will now be put to the membership. The agreement means three things.

  1. We will not have a postal strike
  2. The postal workers will have a pension that gives them a “pension not a pot”
  3. A more general settlement between CWU and Royal Mail will follow.

If you don’t believe me, here’s Terry Pullinger spelling it out to members.

Terry Pullinger four Pillars Agreement from The CWU on Vimeo.

5,000 people have watched that video in the last 24 hours, the FT has reported on it in the starkest terms

But the story has hardly made the front page. I guess that 140,000 people agreeing a radically new pension settlement which pleases both them and their employer, isn’t considered the “right kind of engagement”.

USS – more “wrongful engagement”.

I guess the papers will continue to report the bad news stories. The story of how Carillion over-promised and over-delivered to shareholders , under-priced contracts and failed to manage its covenant with its pension scheme. This is being reported as a pensions failure, when clearly it is a corporate failure.

I suppose that the impending strike by university staff will similarly be reported as a pension failure, despite the clear evidence to the contrary. The magnitude of the challenge facing the university staff and its union is that the preferred solution, a DC plan that “democratises” (dumps) risk on teachers , will not provide a pension but a pot. We are about to see another strike where staff are engaging with and choosing “pensions” and rejecting “pots”. Presumably – another example of the wrong kind of engagement.

At the risk of sounding cynical, but the “right” kind of engagement, seems to be about the management of “pots” and not with a pension at all. The nearest I hear to calls for pension engagement – from those on the sell side of the argument – is when the argument comes round to the purchasing of annuities.

As far as I can see “industry” calls for engagement are no better than the hawker’s cry

Who will buy!

Everywhere you look, people are engaging with pensions. The WASPI women are engaging with their entitlement to the state pension, politicians argue about the sustainability of the triple lock, Gareth Morgan and others campaign for better integration of universal credit and pensions so that those on low incomes get a better deal (than the crud they get at the moment).

All are examples of engagement with pensions as “a wage for life” and all are ignored by the financial services industry or mocked as the wrong kind of engagement.

The reason why the SIPP providers and the insurers are so vehemently against “wage for life” solutions, is that they see them as a threat to their business plans. Their business plans are built around individuals engaging (or more exactly financial advisers engaging) using highly problematic drawdown problems or very expensive individual annuities.

You can’t get much more engaged than going on strike about something!

I cannot think that all those postal workers and all those university teachers would have considered withdrawing their labour unless they felt strongly, that they were fully engaged.

In case anyone is under the impression that the Royal Mail strike is about more money into worker’s retirement pots, it is not. The contribution into the proposed CDC pension matches the contribution into the DC pension, Royal Mail aren’t taking on more risk -either in terms of contributions or balance sheet. They have simply agreed to a more equitable means of “democratising” risk. The risk will be better shared by members using the mutual assurance that CDC can provide.

So the engagement is not about screwing the employer, it’s about getting the right kind of pension.

I have no evidence of how the UCU will argue their case with their member’s employers , but I suspect the argument will be along the same lines.

That people are prepared to go out on strike to keep accruing “pensions” , rather than getting “pots”, tells me that pensions are engaging an awful lot of people.

The solution is not to abolish pensions!

I have given up on arguments that say the word “pension” is at fault. Financial services people want people to stop using the word. This is hardly surprising, they are no longer selling pensions , they’re selling “pot management” (aka “wealth solutions”). Initially , you may be flattered that your CETV is worthy of a “wealth solution” – but I fear wealth management is not a long-term solution for those in medium and low incomes, even if their CETV is worth £368,000 (on average)

carillion scam 2

While nobody wants to see an end to pension freedom, it’s clear that most people do not want to see an end to pensions. Most people do not see final salary pensions as “pots” and that includes the FCA.

The solution is to promote what we used to call a scheme pension and what we can generically call a wage for life.

Let’s remember that when the full implications of the Royal Mail/CWU agreement.starts sinking in.

target pensions


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

Let’s stop pretending guidance is enough.


News that the Government has thrown out proposals for compulsory guidance to protect us from ourselves comes as no surprise to me , though it has clearly angered Ros Altmann.

Writing on her blog, the former Pensions Minister writes of  the  “Government trying to weaken consumer protection for pensions”. This is doubly odd; Ros is a Tory Peer – accusing her own side of having it in for soon to be pensioners is bizarre; but even more bizarre is her belief in self-help through “guidance”.

Those most at risk of being ripped-off in retirement are those in need of advice not guidance. If we are to learn anything from Port Talbot, it is that ordinary people are not in the least interested in managing their own pensions, they want to hand the hardest, nastiest problem in finance to somebody else. That person is typically a pension trustee (the vast majority of those with the choice, voted for BSPS2). Where the trustees were rejected, people put their trust in the financial advisory system, a system that unfortunately let a number of steel workers down.

I’ve published this mini-poll on this blog before, but here it is again. It was taken on October 23rd towards the start of the steelworkers time to choose on the steelworker’s own Facebook page.poll bsps

The poll was conducted by a moderator of the site and he framed the question; please note – 82.6% of those who voted , voted to have their money managed by an IFA.


Why guidance is not enough.

In her article , Ros Altmann has a touching faith in ordinary people’s capacity to make sound financial decisions with the help of guidance.

“Automatic guidance can help pension customers make the most of their pension savings”.

“Customers need help to understand complex pension choices”

“Free, unbiased, expert guidance is available but many don’t get it”

“Auto-enrolment into free guidance will improve take-up and protect many more customers”

“Government is now trying to remove the automatic guidance clause”

“A shame pension providers have not supported this much-needed change”

“It is in the interests of the industry, as well as consumers, that people have proper help”

These are the headlines and substance of Ros’ argument and I couldn’t agree less. Guidance is a great thing for those who are prepared to pick up the phone and listen, people who have a confidence in the complex system of financial products  that underpins pension freedoms and people who are taking their retirement planning into their own hands.

For most right-wing commentators, this should be all of us. From the mid eighties onwards, there has been a concerted effort to create sufficient financial resilience among ordinary working people , so that Government can “democratise risk“, dismantle collective pension structures and leave us to be master of our own financial destinies.

Whichever right-wing think tank we point at , the answer is always the same, give people the tools and they will finish the job. Pensions Wise was the realisation of their vision and Pensions Wise has failed.

Why do we need “consumer protections”?

The reason the Government needs to protect consumers is because it has given everyone the right to harm themselves. In giving property rights to those in DB schemes back in the 1980s, David Willetts was roundly applauded by the people who wanted to manage their own wealth (his own). But the first round of pension freedoms led to pensions mis-selling and the costly restitution of people advised to transfer – into the DB plans from which they had been “liberated”.

In giving pension freedoms to all, George Osborne simply compounded the earlier mistake. In order to cover his tracks, he instigated Pensions Wise which has been helpful to those who are prepared to listen and trust , but no good at all to the vast majority of people who want someone else to look after their money.

Guidance is “sausage and chips” to the scammers.

sausage and chipsThroughout last year, TPAS were having to take down adverts from scammers purporting to be TPAS, to be supported by Ros Altmann, to be doing the Government’s work. In ever more audacious statements, lead generators claimed to be offering us the guidance we needed. It’s “sausage and chips” stuff.sausage and chips 2

Scammers are clever, they understand that people don’t want guidance, they want to be told what to do. So for every sausage and chips supper , there is a Darren Reynolds, ready to take the after-dinner order.

vega certAnd once someone has put their trust in the financial adviser, the money is gone. It could be going to a fund that offers a “guaranteed 6.5%” (Prufund) or be “Ultra Conservative” (Vega Algorithms) , it could have been invested in Cape Verde or Dubai or in St Lucia (Friendly Pensions). People were prepared to hear the narrative the adviser gave them, because they had decided to trust in the advice.

(By the way – I am not saying Prufund guarantees 6.5% pa – it doesn’t, but that’s what steelworkers I spoke to thought they were buying into).

Financial Advice is a minority sport

I’ve likened advice to a minority sport for a reason; like fox-hunting , it is great for the few who can afford it , but is meaningless to most people, who can neither afford it or enjoy its benefits. My friend Al Rush won’t have most ordinary people as clients, not because he’s a snob, but because they don’t need financial advice.

What most people need in retirement is a well organised wage for life from the State and from their workplace pensions. They also need cash to manage life’s emergencies and a sinking fund for occasional pleasures such as holidays, gifts and so on.

If people do need guidance, it is to understand how the State Pension works, how it interacts with Universal Credit and how their workplace pension supplements the income from the Government. When asked, and the CWU did ask, people choose to have a “wage for life” rather than to manage their own pot. The 89% “wage for life” vote from the Royal Mail workers was a vote against a DC pot or a cash balance paid to them from a DB plan. It was a vote for what ordinary people have always wanted, a “wage for life”.

This is no different from BSPS , where the vast majority of those who voted, chose a wage for life in BSPS2 or the PPF and those who voted for freedom, actually chose to have their “pot managed by an IFA”.

If you don’t trust your trustees , then your financial adviser is your alternative , but what makes you special enough to need an IFA? (as Al Cunningham would ask)

People choose to be “free of freedom”

As I have said in my CDC submission to the Work and Pensions Select Committee. Most people want to be free to choose, but will choose the security of a managed solution. If we want those solutions to default to Self Invested Personal Pensions, which is frankly what the financial services industry would generally prefer, then we can persist with the current approach which will have people transferring out of DB into a range of “advised” solutions, people coming out of workplace pensions into a range of “advised solutions” and those advised solutions being of varying quality.

But I don’t think there is any evidence that that is what ordinary people want.

What people want is to have value for money pensions which pay them a wage for life. That’s what the people I spoke to in Port Talbot thought they were getting, it’s what the people who Angie Brooks advises thought they were getting and it is what millions of people saving into NEST and other workplace pensions think they will get.

People save for retirement and want an easy life when they get their, they want to be free of choice, not to have freedom of choice, they want advice not guidance and they want products that give them predictable outcomes – they can trust.

Put guidance to one side

What Ros Altmann and her friends in the House of Lords want is a kind of automatic guidance that will be a complete waste of time. An enforced Pension Wise which will become a chore for people looking to get on with it.

What I want is a system which provides everyone with a default option for their money – an option which we can code-name CDC – but which will be better understood as a “wage for life”. It is in fact a “target pension” , rather than a guaranteed pension and it can be bought at retirement instead of an annuity and exchanged back for cash , in case of emergency.

It’s a wage for life that is not underpinned by a sponsor or insurance guarantee but relies on the old-fashioned principles of trust and mutual assurance. There is nothing about this “wage for life” approach that needs advice or guidance, though people are free to go to the new Government Advice Body for more information or indeed pay for an opinion from a financial advisor.

Let’s put guidance to one side for the moment and focus on the main event. Let’s give people what they actually want, not what we think they need.




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

The democratisation of risk?


Feeding in a time of plenty

I can’t say I’d heard this phrase before Bruce Porteous of Aberdeen introduced it into conversation at yesterday’s Westminster Business Forum.

The only reference I can find to it on the web is a sneering jibe at “Cowboys in Superland” back in 2002.

The stock market boom was fueled by retirement fund money, now it’s crashed and retirees are angry.

Capitalism may have to be reined in again to protect ordinary people’s savings

It’s been a long time since we’ve seen a real fall in people’s savings.


The FTSE 100 since the introduction of auto-enrolment

So now is a good time to herald the risk transfer from collective to individual using the glowing term “democratisation”.  I asked Bruce and the panel he was on – what they meant by the phrase

“democratisation of risk”

but that was too hard a question to answer with  a coffee break approaching.

The hardest nastiest problem in finance

Asking ordinary people to provide themselves a wage for life (aka pension) from a retirement pot may be what Bruce was referring to. It’s certainly what the acerbic Aussie was referring to.

David Harris (a genial Aussie)  has commented on the phrase since this blog was published 

Mentioned in Ireland 2014 against a backdrop of likely pension reforms. Also highlighted in the debates around the privatisation of US social security between 1997-2000. Also linked with the sharp decline in DB in Australia. Reality is risk moving onto DC member as employer /plan sponsor reluctant to have it on balance sheet- global markets/competitive

If “democratisation of risk” means dumping on the individual the anarchy of market forces, then the phrase “the abnegation of risk management” seems more appropriate.

Pot or Pension?

Later in the morning, the Westminster Business Forum heard from Terry Pullinger of the CWU about how 89% of his members voted against a “pot” and for a “pension” (a wage for life). They turned down a pot from a Zurich managed DC scheme and they turned down a pot from a self-administered cash balance plan and they voted for a scheme that paid a pension.

Terry’s overwhelming good humour turned a dry affair into a morning of good natured debate. If you want to see what I mean , you only have to watch one of his videos – like this one, where he announces the mediated settlement the CWU and Royal Mail have come to.

In my opinion, the scheme they voted for, a collective defined contribution scheme, really would democratise their risk.

Because – instead of leaving each individual postal worker , in the employ of Royal Mail, to take the market risks and the risks of their living too long, the union and employer are embarking on an experiment in mutuality where the risk to the employer will be confined to paying a defined contribution and the market and longevity risks will be pooled between the members of the scheme – both pre and post retirement.

This does not eliminate the hardest, nastiest problem in finance, but it makes it a lot easier to manage.

When the crash comes

So far, we have only seen rising markets , since the democratisation of pension saving (aka auto-enrolment). No-one has had cause to worry that the pots they have built up have gone from full to half-empty. But this will happen.

When that happens, some of the drawdown strategies in place, will fail. They are not sufficiently robust to survive the sequential risks of a sustained downturn in markets.

When the pot falls before retirement, pounds cost averaging can recover the situation, but if it falls in retirement – where pots have negative cash-flow, there is no such salvation. Paying a pension over time is not called the “hardest, nastiest problem in finance” for nothing.

So when the crash comes, and it will come several times in the savings careers of the younger auto-enrollers, there will be great gnashing of teeth, and John Ralfe will be telling us so – for not buying annuities and those who talked about the “democratisation of risk”, will have retreated to their city offices.

I thought of Terry Pullinger a bit like Noah, there he was with his big staff and his big boat beckoning everyone aboard his Ark. Meanwhile, the rest of us were basking in the glorious sunshine of a sustained heat-wave.

Flood? – My arse!

Of course we know what happened next!

At the end of the morning, as we broke to go home, I asked Terry’s panel – the Chair and the audience another question

Is there anybody in the room that doesn’t wish Royal Mail and CWU the successful realisation of their plan?

As with my question about the democratisation of risk, I got no reply.

Posted in CDC, pensions, Trades Union Congress, trustee | Tagged , , , , , | 1 Comment

“Focused, faster and more frequent” – tPR unmasks “Friendly” Pensions.

friendly 3

When the Pensions Regulator launched its corporate plan in April of last year, I wasn’t the only person to be a little sceptical. “Intervening more frequently and acting quicker?” – the proof is in the pudding and the pudding had gone cold. That was then – this is now.

Actions are speaking louder than words

Last week this blog asked the Pensions Regulator’s CEO- Lesley Titcomb to intervene quickly to take down factory-gate adverts that were frightening people towards taking a cash sum from their Carillion pension – minutes after the announcement that the sponsor was bust. Within a couple of minutes, I had a personal response and by lunchtime the adverts had been taken down. I am impressed.

Friendly and the “not so Friendly” Pensions

For the past couple of years, I have been following the sad case of Friendly Pensions Limited.

The name may be familiar if you were involved in workplace pension selection in 2013 and 2014. A master trust of the same name pioneered many of the techniques which are best practice today. Unfortunately, it was inextricably embroiled with another (not so) “Friendly Pensions”.

Despite an attempt to re launch as “GenLife”, the proper Friendly Pensions never recovered and was taken over by Smart Pensions, who look after its employers and members to this day (and for many years to come). That story had a happy ending, but the story of the Spanish Friendly pensions continues.

As far back as October 2015, the ambulance chasers were out for the victims of this Friendly scam. But the matter was properly in the hands of the Pensions Regulator, which is why this blog has been silent.

Yesterday, in a break from the past. The Pensions Regulator published the full story of the Spanish Friendly Pensions – together with case studies of how people were sucked into it. I re-publish the Pensions Regulator’s press-release.

Anyone who has dealt with tPR in the past, read this – and think again. Anyone tempted by ads like the one at the top of this blog – resist.

If you are in any doubt about what you are doing , speak to the Pensions Advisory Service , by following that link or by calling 0300 123 1047.

Pension scammers ordered to repay £13.7m they took from victims

Ref: PN18-02
Tuesday 23 January 2018

Four people who ran a series of scam pension schemes have been ordered to pay back £13.7 million they took from their victims.

David Austin, Susan Dalton, Alan Barratt and Julian Hanson squandered the money after 245 members of the public were persuaded via cold-calling and similar techniques to transfer their pension savings into one of 11 scam schemes operated by Friendly Pensions Limited (FPL).

Victims were told that if they transferred their pension pots to the schemes they would receive a tax-free payment commonly described as a “commission rebate” from investments made by the pension scheme – a form of pension scam.

Today (23 January) the High Court ruled that Austin, Dalton, Barratt and Hanson should repay millions of pounds they took from the schemes over a two-year period.

The Pensions Regulator (TPR) had asked the High Court to order the defendants to repay the funds they dishonestly misused or misappropriated from the pension schemes – the first time such an order has been obtained.

Austin laundered funds from the schemes into his bank account and the accounts of family members in the UK, Switzerland and Andorra through a number of businesses that he had set up in the UK, Cyprus and the Caribbean, including FPL. TPR showed the High Court evidence of how members of Austin’s family had lived a life of luxury using the money – including showing off their spending on expensive goods, ski holidays and trips to Dubai and the Mediterranean on social media sites.

Dalriada, the independent trustee appointed by TPR to take over the running of the schemes, will now be able to seek the confiscation of the scammers’ assets for the benefit of their victims.

Nicola Parish, TPR’s Executive Director of Frontline Regulation, said: “The defendants siphoned off millions of pounds from the schemes on what they falsely claimed were fees and commissions.

“While Austin was the mastermind, they all took part in stripping the schemes almost bare. This left hardly anything behind from the savings their victims had set aside over decades of work to pay for their retirements.

“The High Court’s ruling means that Dalriada can now go after the assets and investments of those involved to try to recover at least some of the money that these corrupt people took. This case sends a clear message that we will take tough action against pension scammers.”

In his judgment, Judge Mark Pelling ruled that Austin had been the “mastermind” behind the scam and that all four of the defendants had acted dishonestly.

He ruled that Mr Austin and Mr Barratt were jointly and severally liable to pay £7,713,317.71 plus interest, that Mr Austin and Ms Dalton were jointly and severally liable for £5,900,947 plus interest and that Mr Austin and Mr Hanson were jointly and severally liable to pay £122,937.37 plus interest. The judge also ordered that they pay the costs of TPR and Dalriada on an indemnity basis.


How the scam worked

  • Between November 2012 and September 2014, 245 victims were cold-called or lured by a series of scam websites and persuaded to transfer their pension funds into one of 11 scam schemes. The victims were told their pensions would be reinvested and they would be paid an upfront cash lump sum for making the transfer. They were also lied to that their funds would be put into assets, bonds and HMRC-compliant investments to meet the target return of 5% growth a year.
  • False documents were used to trick staff at the ceding schemes – the schemes where the victims had their pensions – into believing that the pension holders worked for companies linked to the scam schemes. This meant the staff were persuaded to allow £13.7 million of funds to be transferred to the scam schemes.
  • David Austin installed Alan Barratt, Susan Dalton and Julian Hanson as the trustees for the scam schemes and they were then paid to act on his instructions, allowing the scheme monies to be used at Austin’s will. Mr Barratt and Mr Dalton also acted as salesmen for Mr Austin’s Spain-based business, Select Pension Investments, persuading victims to transfer their pension pots into the schemes. A small proportion of the funds – between 10% and 25% of the amounts transferred – were given back to the victims as their “rebate”, although many victims were assured that this payment was coming from the investment provider not out of their pension pots. More than £1 million was paid to “introducers” or “agents” who used cold-calling to encourage pension members to transfer over their funds.
  • More than £10.3 million was transferred to businesses owned or controlled by Mr Austin, including the current accounts of Friendly Pensions Limited and Friendly Investments Company Ltd. Mr Austin, a former bankrupt who had no experience of running an investment company, even used the bank accounts of his dead father-in-law and his elderly mother-in-law to move around hundreds of thousands of pounds. Mr Barratt was paid £382,208, Ms Dalton more than £168,000 and Mr Hanson £7,000. Mr Hanson’s scheme had become active only weeks before the scam was stopped. The High Court found that on the available evidence, Mr Austin and his family had derived at least £1.355 million of benefit from the scam.
  • Just £3.2 million of the funds was invested. Among the investments were £2 million in an off-plan hotel development in St Lucia called Freedom Bay and an unregulated commercial property bond. £120,000 went to a company registered to Mr Austin’s daughter, Camilla Austin, to fund her father’s legal costs in a separate case.
  • A whistleblower contacted TPR about the scam in November 2014. TPR then appointed Dalriada as an Independent Trustee to take over the running of the schemes from Mr Barratt, Ms Dalton and Mr Hanson, to prevent further funds from being taken out of the schemes by the scammers.


Case studies

Names have been changed to protect the victims’ identities.

Case study 1: The refusal of one man’s pension provider to agree to a transfer saved him from losing more than £50,000 to the scam

Donald, 57, was cold-called by Susan Dalton in February 2013 and told that if he transferred his pensions from two companies to her scheme he would get a guaranteed return of at least 5% a year, plus a 10% cash lump sum upfront.

But while one of his pension providers agreed to the transfer of his £17,000 pot, the other refused to transfer his £58,000 pot. Instead, ReAssure rejected a series of letters from companies linked to the scammers, saying it was not satisfied that the receiving scheme was a valid one. Eventually, the scammers gave up trying to persuade ReAssure to make the transfer.

When he reached 55 in 2015, Donald contacted Susan Dalton to ask to draw down 25% of his pension. But she claimed he had never transferred his pension and then ignored his calls and emails – prompting Donald to call Action Fraud.

Donald, from Hull, said: “If ReAssure had allowed my pension to be transferred it would have been a disaster. I would have lost everything. I have had a very lucky escape.

“My wife and I were council tenants so Susan Dalton should have realised that we did not have lots of money and that our pensions were an important source of income to us. She totally misled me into transferring my pension and paid no regard for my financial well-being.

“She told me what I wanted to hear and I believed it. Looking back now, everything was basically a lie or a betrayal. I was naive. I was conned by a professional con merchant.”

Case study 2: A man who had given up work to care for his seriously ill partner and their three children had almost £50,000 taken from his pension pot by the scammers

Colin, from South Wales, had become the full-time carer for his partner when he was approached via text message.

He was offered up to 10% of his pension as a cash lump sum which the agent promised would not come out of Colin’s fund. Instead he was told his pot would be invested in the construction of holiday complexes in St Lucia with good returns. He was tempted by the opportunity to spend some money on his children, redecorate their home and potentially go on holiday with the lump sum.

After hearing about pension scams in 2014, Colin tried to approach the scammers but could not get in touch with them. Dalriada, the Independent Trustee appointed by TPR, later broke the news to him that he had fallen victim to a scam.

Colin, 48, said: “I should have known that it was too good to be true. I should have sought advice and asked more questions, but I didn’t.

“I had contributed towards my £50,000 pension pot, for which I had worked really hard, and now that has been taken from me.

“The loss of my pension will have a massive impact on my life. When my children finish school I will be around retirement age. There will be no money to draw down when I turn 55 and no pension savings for later life.

“I was greedy. I feel stupid for throwing away my financial future for £4,200.”

Case study 3: A couple lost both of their pensions after falling into the clutches of Alan Barratt

John and Samantha, from Hereford, were persuaded in 2013 that if they transferred their funds to Barratt’s pension scheme they would get better returns on their investments.

Their pension provider warned them that they believed the transfer could be pension liberation fraud, but Barratt convinced them to carry on, saying they would get a lump sum as commission for transferring their funds.

The couple then transferred a total of more than £78,000 – receiving £11,800 as their “commission”. But while they had been assured the funds would be invested in low-risk investments, they were sent details of a truffle trees firm in the West Country.

The couple were so concerned they contacted police. HMRC later contacted the couple to tell them the “commission” had come out of their pension – and handed them a tax bill of thousands of pounds.

John, 46, said: “As a result of my dealings with Alan Barratt my final salary pension is in a scheme that I don’t understand the status of but which I have been told is a scam.

“As far as I know, the majority of my pension fund is invested in truffle trees but I doubt whether that is legitimate. My partner appears to have lost her pension too.

“I deeply regret ever listening to Mr Barratt.”

Editor’s notes

  1. Section 16 of the Pensions Act 2004 allows TPR to apply to the High Court for a restitution order, requiring those who have been involved in the misuse and misappropriation of pension scheme assets (whether dishonestly or otherwise) to compensate the schemes for the losses suffered.
  2. TPR is the regulator of work-based pension schemes in the UK. Our statutory objectives are: to protect members’ benefits; to reduce the risk of calls on the Pension Protection Fund (PPF); to promote, and to improve understanding of, the good administration of work-based pension schemes; to maximise employer compliance with automatic enrolment duties; and to minimise any adverse impact on the sustainable growth of an employer (in relation to the exercise of TPR’s functions under Part 3 of the Pensions Act 2004 only).
  3. friendly 3
Posted in advice gap, pensions | Tagged , , , , , | 1 Comment

“Trust is a fragile thing” – it’s based on sharing.

PerspectiveAlistair Queen of Aviva is a great representative of his company. He curated this graphic to twitter yesterday – and it was well liked.

Alistair’s comment was made in the context of frustration from Jon Stapleton, a journalist who has done as much as many to keep trust in pensions.

How do we square the drain pensions were to the stricken Carillion, with the alternative truth that Carillion have let down (some of) their pensioners. I mention “some of” as it now appears that some of the Carillion Group’s pension schemes may be solvent enough to stay out of the PPF – should a new sponsor be found.

Jonathan Stapleton is right on the money here;

And Jonathan’s bang on the money here.

Carillion’s behaviour has been judged “egregious”, but it paid out almost as much to its pension scheme as it did to its shareholders. The truth is there was not enough coming in to meet the expectations of both sets of stakeholders. This is how business failures happen.


Which is why perspective is needed.

That the UK DB model is broken – at least for the corporate sector, is not in doubt. For every Unilever (who yesterday announced it was ploughing another £600m into its pension to halve its deficit) , there is a Carillion. There is not enough profit being generated to meet the reasonable expectations of shareholders and accrue future guaranteed pensions.

That is why Joanne Segars and Andrew Warwick-Thompson (and other pension stalwarts) have run to the higher ground of local government pensions. Up there, conversations like those between Stephen, Alistair and Jonathan, aren’t necessary. The tax-payer – particularly the council tax-payer, has a limitless capacity to meet pension obligations. Indeed many of us are paying more into other people’s pensions , than we are into our own.

It is easy to get a perspective on the pension problem if it isn’t your problem.

It’s not so easy to trust pensions -if you’re losing some of yours!

Trust is a fragile thing, and every Carillion makes trust a little harder to restore.

Some of us, the Friends of CDC, are arguing for a new type of pension sponsorship, where risk- if taken by an employer, is taken on a DC basis and risk, when taken by members – is shared collectively.

This is an even more fragile concept, you would hope that a minister for pensions would be receptive to it. Sadly yesterday brought news of a leaked letter from Guy Opperman (the Pensions Minister) which suggests he is not in problem- solving mode (yet).


Hopefully, the Minister’s position is as wrong as the headline;- the Government put Defined Ambition on Ice in the summer of 2015, it has been in the fridge ever since.

The report in FT Adviser, is based on a leaked letter to former Shadow Minister, Jack Cunningham. Apparantly our pension system

“needs time and space to adjust to other reforms underway,”

and  it appears that

risk sharing is an area that the government will “revisit once there has been an opportunity for that to happen”.

If I were to put a little perspective on these comments, it would be this.

If Government was to wait to see the consequences of its actions;-

  • we would still have Darren Reynolds selling 5Alpha to unsuspecting steelworkers.
  • We would have a plethora of dodgy master trusts bottom feeding in the auto-enrolment shark-pool.
  • We would have the vast majority (not the tiny minority) of companies pre-packing their DB plans into the PPF.

The reason we have a stable pension system in this country is that Regulators are getting it right most of the time, and when they’re not they have people like me tweaking their tails.

The Minister for Pensions and Financial Inclusion (to give him his chosen title), does not know about CDC and he’s not showing any great inclination to learn about it (trust us, we’re trying).

However, those who are at the FCA and the Pensions Regulator and at the DWP and even at the Treasury, do want to know about CDC, as they see it as a way of solving problems, not creating them.

Trust is a fragile thing – it’s based on sharing

Over the next few weeks, I and my colleagues will be trying to convince our Pensions Minister that he is wrong in assuming that

“significant legislation” for CDC schemes to come to life would need to be introduced, and the existing rules would need to be changed.

We would vigorously contest this statement to Alex Cunningham

 “We continue to believe that significant legislation would be needed to enable and regulate this type of pension.

And we seek to change this position, which has prevailed for the past three years and is blocking progress towards restoring confidence in pensions.

“Whilst we continue to be interested in collective pensions, the governments view is that because the breath of its scope, the legislative framework set out in the 2015 Act is not the most effective way of introducing the provisions needed to provide for the collective schemes currently being called for.”

If Guy Opperman wants to hear why we think he is wrong and how CDC could be offered to the 140,000 postal workers who want it, he should come and talk with us. We have made the offer and we keep it open.

Even politicians can get some perspective by listening to others! We have answers and we want to share them, does our Pensions Minister want to share time to hear them?

Thanks to Maria Espadinha of FT Adviser for her timely and helpful edits

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Self-sufficiency for pensions.

Pensions or pots

Pensions or pots?


Whether you are in charge of the PPF , one of the 13 Carillion defined benefit schemes, or any one of the thousand or so “distressed” pension schemes that might no have a sponsor able to bale it out;-the term “self-sufficiency” should be intoned several times before going to bed. It will bring sweet dreams.

Immunising a pension scheme against the need for further contributions from an employer is now the holy grail for the Chair of the Trustees. It is of course impossible for any scheme to accurately predict the death of its final pensioner and funding for that event has to rely on either insurance (buy-out) or the use of an employer as a quasi insurer.

Defined benefit pension schemes weren’t designed with built in obsolescence.

Many schemes today have developed investment strategies that not only immunise themselves against all known risks, leaving only the risks we cannot imagine as “vulnerabilities”. It is an interesting philosophical question as to whether these risks are worth further investigation. I’ll leave that at an academic level, the sky could fall on our heads, but it’s a risk too far for me.

Which begs the question, what more can a scheme do?

The answer is increase it’s operational efficiency, so that the drag on the scheme’s investment strategy from the business of paying pensions , is minimised. This was the conclusion I came to last week. There is only so much you can do to set your investment strategy, the business of managing the needs of members gives much wider scope for progress.

Central to the argument is the question of “benefit”. A defined benefit scheme only “benefits” someone, if it fulfils a need. If there is limited need for a “wage for life” , then a member should consider exchanging “pension for pot” and create a capital reservoir to meet future financial needs on an “ad hoc” basis.

There is a strong body of opinion that thinks that people would be better off with capital rather than a regular income; it is what underpins tolerance of workplace pensions, which have – as yet- no confirmed “income for life” option, relying – as most DB schemes do – on the annuity market for “self sufficiency”.

It is highly ironic that the current Conservative Government – and in particular its leader , are calling for employers to sponsor defined benefit schemes to a point where they are insured against being a threat to the PPF, while encouraging people to save into DC pensions where the promise is “that no-one need ever buy an annuity again”.

As schemes consider how they can best operate to make themselves self-sufficient, I think it reasonable that they help their members determine for themselves whether they have special need of capital or would be better with a “wage for life” pension.

This has been the themes of recent blogs. I favour DB schemes running their own pension wise sessions for more mature members, something like John Cridland’s mid-life MOT to determine “pension or pot”

Towards personal self-sufficiency

Just as pension schemes should be seeking to be self-sufficient of employers, ordinary people should be seeking to be self-sufficient of work. Since work means pension contributions – in this age or workplace pensions, we could restate that as saying that we should be establishing our own personal “recovery plans” that ensure that our targeted benefits in later life are fully funded.

To a very large extent, this is what a CDC plan is trying to do. It is trying to take away the hardest nastiest problem in finance, the creation of financial self-sufficiency in later years, from individuals.  Instead CDC looks to share this problem among a wider group.

Pension or pot?

Reluctantly, the private sector his putting the guaranteed defined benefit pension scheme behind it and moving on. Putting the existing promise on a self-sufficient basis is the limit of a modern trustee’s ambition. Managing the strategy involves sound investment management and an operational strategy designed to maximise the efficiency of pensions , by paying them only to those who want and need them. Those who are special and need pots rather than pensions, should be free to leave and with blessings upon them.

But those who stay, who always assumed a company pension scheme provided a company pension (whether now called workplace or not), then an equivalent choice should also exist. Currently the choice is between an annuity and a capital reservoir (from which we can draw down). Neither is particularly satisfactory.

If Theresa May is calling for greater security for members of DB plans, she should also be thinking of security for those who are not in such plans. I will resist cheap shots about MP’s pensions (or of the gap in security between those in the private and public sector).

Pensions as well as pots!

What I am calling for , and all Friends of CDC are calling for, is that the Government are even-handed and put in place a basis by which those saving for their future, and those with existing DC pots , can have reasonable expectations of a target pension.

The cliff-edge – from which you fall when ceasing to accrue DB, needs to become a gentler slope. CDC is a way – not just for the 140,000 Royal Mail workers, but for the millions of new savers plus the rest of us historic DC savers, to think of our “pots as pensions” – if we want to.

Self-sufficiency is an aspiration for all. We should define our ambition and set the bar a little higher than we currently do. When I hear the Prime Minister talking about the future , as well as the past, I will be more minded to commend this Government’s private pension policy.


I want the Prime Minister on the left and not the one on the right

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Pensions aren’t on the brink of anything!

carillion brink

I’m sorry to disappoint the headline writers at the BBC, but pensions are not about to change very much, are not in crisis and aren’t really worth the headlines they are getting.

Those were the stunning findings of a group of pension experts holed up in windy Worcester on a stormy January evening.

Here are the four great non-stories your headline-writers will not print (but we discussed last night).

  1. Defined benefit schemes are finally getting their shit together and recognising that integrated risk management means managing your pension with a mind to the risk to the sponsor, to scheme assets and to scheme liabilities.
  2. Defined contribution schemes are waking up to their being savings plans not pension plans.
  3. Ordinary people are taking their money away from workplace pension schemes, because they can.
  4. There is no obvious way to convert a self-owned pension pot into a pension.

This does not add up to a crisis, it is just a stage on a circular journey which hopefully will take us back to where we started in 1950 or whenever. Because, despite all the tra-la-la, for the ordinary person, nothing has changed or is likely to change anytime soon.

We learn, we work, we stop working and put our feet up. Pensions are our way of putting our feet up, or at least doing what we want to do , rather than what our bosses or customers want us to do.

In place of a wage from employment , we expect a wage from investments. This is incredibly boring as it isn’t contentious and it tells us that in basic human needs, the world hasn’t changed any since the second world war (or as long as most of us can remember).

Crisis what crisis?


rubbish record-rubbish story

There is no story at Carillion, at least no story that spells that pensions are on the brink.

It was not pensions that brought Carillion down. Carillion brought its pension scheme down (as the FT reports).

Mr Rubenstein said that if banks and governments had thrown Carillion a financial lifeline last week there might have been an opportunity for Carillion to restructure its pension debt.

“What brought down Carillion in my view was they simply ran out of funding,”

This is not a pensions crisis, it is a local problem – in the grand scheme of things we will be able to put our current troubles in a wider historical context and be amazed at current hysteria.

In the 80s and 90s, defined benefit pensions were worried about being in surplus and in the last twenty years, they are worrying about being in deficit.

Over the last five years, the way we are building up pensions has changed, fewer people are building up pensions at a fast rate and more people are building them up at a slower rate. The overall picture is one of more people saving for a pension but with shallower resources.

If there is a potential crisis, it’s that – as yet- we haven’t got a way to turn these savings into the retirement income that people think they’re getting – “workplace pension”, the clue’s in the title.

We have abandoned the idea of guaranteeing people a wage for life by forcing them to buy an annuity, but we haven’t given them a better alternative. Or at least Government’s call for innovation have fallen on deaf ears. At the moment we are in the hands of the wealth management industry who are showing conspicuously little interest in finding a solution to the hardest, nastiest problem in finance.

Instead of looking to solve these problems, we take each corporate failure , as indicating pensions are on the brink. This is the BBC headline which prompted this article. Some 28,000 pensions at Carillion are on the brink of going into the PPF and of being paid out at a marginally lower rate than had they been paid by the now defunct employer. This is unfortunate but it is not a crisis.

The PLSA warn that up to 3m of those lucky enough to have a defined benefit pension , could find themselves with someone else paying the pension at a slightly lower rate. This is taken to mean the wholesale dismantlement of the system of workplace pensions we built up since the second world war.

I am very glad that Mr John Ralfe has stood up and said something sensible about this. As he has said a lot of silly things recently, I am going to quote him – with approval- for this.

The PLSA said there was a “real possibility” of a collapse for more high-profile pension schemes, and that one solution could be the pooling of resources into “super-funds”, which would then have bigger investment opportunities.

Pensions consultant John Ralfe has described the super-fund plan as “outrageous”.

He said there was “no crisis in defined benefit pensions, so there is no need for crisis measures”.

His confidence is based on the existence of the pensions “lifeboat” – the Pension Protection Fund (PPF).

I’m sorry to sign off with yet another “non-story” but when John Ralfe is right, he is very right indeed!

FAKE NEWS is just that

Our pension system is changing, but our need for pensions is not.  By faraway the most significant thing to happen in the past twelve months – and this is not fake news – is that 87% of Royal Mail workers agreed they would rather go out on strike than be left without a wage for life when they got to retirement.

For the vast majority of ordinary British people, the best bit of pension news – is no news at all;

just get the bloody things paid and leave me to read about something else over my corn flakes.

Consequently, the needs of ordinary people for boring predictability, and the needs of the press for “disruption” are fundamentally at odds.

The continued reporting of fake news about pensions being on the brink, not least by the PLSA, is driving a substantial proportion of the 11m people in this country with defined benefits, to swap pensions for wealth in what is likely to be (for most) a very unsatisfactory long-term deal.

Earlier this week, somebody – I’m pretty sure it was the Pensions Regulator got Google to drop an advert that pumped out FAKE NEWS on Carillion’s pension situation, on current options and (if you clicked through) on the loss of pension rights.

Romi scam

It is absolutely the responsibility of those of us who get pensions, to put our foot down and stop this kind or rubbish being pumped out. Whether it be sensationalist reporting on the BBC (to be fair to David Peachey, his article belies the headline) or in the Daily Mail (this FAKE NEWS has caused a lot of heartache) or indeed in Google, people are being bombarded with stories which are ill-researched and sensationalist.

carillion scam

Work is boring, pensions are boring – there’s a synergy there.

Sorry guys, this blog is not giving in to the “quel horreur!” school of comic-strip journalism that sees pensions tinkering on the brink of an undefined abyss.

Pensions are rebuilding – they are more inclusive but shallower. We save for a pension but have no good way to exchange our pensions for a wage for life, these are the facts of life in 2018. Let’s get on with making pensions better rather than throwing rocks at them

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“Of margins and men”. Were the City and Carillion ever friends?

City and Carillion

Of all that is being said about the collapse of Carillon, the comment that remains with me is something said by Robin Ellison, in his capacity as   in an interview with IPE.

The FCA is looking at asset management companies’ margins, suggesting that the average figure of 35% is too high. For Ellison, those margin levels seem “about right” for a service industry. Other industries – such as construction, where the figure is closer to 5% – are content with lower levels.

When we have growled about executive pay, distribution of dividends and the cost of historic pension legislation, the bottom line remains. There was insufficient money coming in, to afford the payments going out. At the beginning of this week, Carillon has only £29m cash in the bank, it was not trading as a going concern. It went  bust.

So just who was content with a 5% margin on construction contracts? I suppose those awarded the contracts – Government- and in the short term- the tax-payer. Collectively we drove the price of the services we were asking of Carillion below a level that Carillion could withstand and it went bust. The logic of this argument is that Government and the tax-payer need to take a long hard look at the way we run large construction contracts (and finance them).

So who wins from low margins?

So  don’t agree that Carillion and their competitors were happy with the 5% margins they were keeping. The article is dated March 2017, before the first of the Carillon profit warnings. I suspect that at the point this interview was given, Robin was content with the employer’s covenant too.

But in July 2017, the wheels fell off. The cordial relationship between Carillion and the City was over for ever. What followed after was simply the aftershocks of the July profit warning.

Carillion share

The bad news in July surprised everyone


Received wisdom says that you cannot run a business for ever on wafer-thin margins , sooner or later – you will hit a problem – as Carillion did, and there will be insufficient reserves to meet the ongoing liabilities (including the liabilities of its various defined benefit pension plans (and their deficit recovery plans).

Who defends the indefensible? A fool or a joker!

I suspect that Robin knew that, just as he knows that the 35% margins for asset managers (and service industry margins in general) are unsustainable. Robin Ellison’s career has been established on his having the Chutzpah to defend the indefensible, (while doing the right thing despite what he says).

Nobody negotiates with a fund manager , knowing that they’re charging seven times the margin that you’re getting from your customers, without questioning those margins and I simply don’t believe that Robin was prepared to subsidise the lifestyles of those in the City at the expense of the Carillion shareholders.

Robin Ellison was not in a corner, I suspect that he was in wind-up mode.

A failure in market economics

Of course Robin is of the City and of the service sector and he has enjoyed the margins to which he has referred. He is a very extreme cases of someone who puts his money where his mouth is and attacks regulation at every opportunity. His great friend, Con Keating , when asked last week by the FCA  for his views suggested that “the only good regulator is a dead regulator”. I am sure that Robin would have agreed – Con too can see the funny side.

But to have a de-regulated system, whether we are referring thinking of an enterprise or its pension scheme, we need to have strong internal controls. In most British companies, these controls exist, at Carillion, they appear to have broken down, Carillion is the exception that proves the rule – it is not the rule itself. Carillion is a market failure, not a regulatory failure.

Which is why we have the PPF. Ordinary people should not be solely dependent on the covenant of an employer for the payment of pension promises, there should be a pooling of risk, which is what the PPF does – the PPF takes the risk that an employers cannot take and it manages it off with the help of stronger companies (that pay a levy). I have no doubt that the PPF will absorb whatever part of Carillion’s schemes – it gets landed with, it is a success. Robin has the comfort of offering us his “laissez-faire” views from his tight-rope , while others tighten the safety net below him.

Again, I suspect that wry smile on Robin’s face – an endearing feature of his Chutzpah, is his delight in having someone else’s cake and eating it.

 Robin is not wrong, he’s naughtily right!

Robin EllisonRe-reading Robin’s interview to IPE , I can see why he is one of the few Trustee Chair’s who I would have dinner with. He repeatedly points out the fallacies of conventional de-risking, the need to take long-term views and the positives of direct investment into infrastructure (what a few months later is being called “patient capital”). Were I to afford to eat in Robin’s restaurants, I would buy him supper and listen to him speak all night,

Robin’s provocative comments throughout the IPE article, make for great reading. I am sure he enjoyed the interview as Carlo Moreolo enjoyed writing it up.

It remains a cameo that could variously be described as “pride before a fall” or of “mischievous prescience”. I prefer the latter.

However the fun has now stopped, the PPF have arrived, the schemes will go – quickly I suspect, into the PPF (there are already 5,900 of the 28,000 members in the lifeboat).

We now have the extra moral hazard for those who want to keep schemes out of the PPF, that members become vulnerable to lastminute.scam. Much as I would like to see Tarmac and McAlpine and other great schemes soldier on, I fear that we live in a wicked world, and the mischief that Robin Ellison can manage, will be visited on his members without Robin’s integrity and humanity.

In defence of Chutzpah.

We have much to learn from Carillion and – as it touches pensions – I look forward to more from Robin Ellison. His wit, Chutzpah and integrity will continue to be needed in the months ahead.

With a little humour, good will and understanding, the City and Carillion could have been friends. Sadly, these things seem to have been missing. What happened in July last year, suggests that the two were never really on speaking terms. Robin could have changed that.

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Who need’s a factory gate when there’s google


Update***** Update****Update***** Update*****Update*****Update

The ad below appeared this morning as the top Google Ad on the search “Carillion pensions”.  I asked the FCA and tPR to ask for it to be taken down shortly after and it has been taken down at lunchtime.

We are quick to denounce regulators for being slow to act, but we are slow to praise them when they act effectively. Thanks regulators, especially tPR who have responded at the highest level.

carillion scamThere are thousands of deferred pensioners in Carillion’s 13 DB plans who are waking up feeling vulnerable and scared. If they google “Carillion Pensions” , the first thing that google will offer them is the ad above. I won’t do it the honour of making the link live, but were you to press it, you would land on this.

carillion scam 2

Scroll down and you will find this;

Carillion scam 3

To which we could add, transfer now , before your scheme goes into the PPF.

This might seem dodgy to the trained eye , but it looks pretty plausible if you are a Carillion employee who has just lost your job and suspect you might lose your pension.

Even more plausible if you read the small print about Financial-Advisor.co.uk

Carillion scam 4

.I’ve no idea which advisers are paying for Financial-Advisor.co.uk ‘s leads, but clearly one of them is prepared to help out with some clever compliance stuff so they can’t be seen to be soliciting transfer business.

As with Celtic Wealth/Active Wealth in Port Talbot, the tactic is for the factory gating to be conducted by professional lead generators – except there’s no factory gate like there was at Port Talbot – so the generation happens on Google.

Has Google no shame?

There is nothing illegal about what Financial-Advisor.co.uk is doing. There is nothing illegal about Google selling them the top-priced ad space. This is capitalism with a capital “I” for irresponsible. Google are not responsible for the outcomes of this ad, nor are those paying for the advice and by the time that the punter has filled out all the data collection stuff, we are three or four layers away from the direct approach.

No one will be accountable at Google, nor at the lead generators and meanwhile the vulnerable members will have been caught up in an urgent rush to get forms in before the guillotine comes down and their scheme goes into the PPF assessment period.

The intervening period is the perfect shark pool for those with the agility to profit from the pressures of the imminent departure of the scheme , the lure of capital and the horror of immediate redundancy.

Forget cold-calling , this kind of advertising is far more insidious and relevant to the FCA. I’m asking Megan Butler and Lesley Titcomb to ask  Eileen Naughton, newly appointed CEO at Google UK  to stop running these ads.

So go on – click that add!

Every time someone who knows, clicks the add in real time (google Carillion Pensions) it costs the lead generators money. I suggest that you spend a couple of seconds this morning, making the day of these parasites a little bit less profitable. If anyone wants to go a little further and find out what IFA sits behind all this, go for it.

If we have another Port Talbot at any of the Carillion Pension Schemes, it may be the end of transfers for a while. But I don’t want to see transfers banned and I don’t want to see Carillion deferred pensioners ripped off.

So get to it and see these stinkers off!


The Pension Advisory Service (TPAS) has set up a dedicated helpline for Carillion pension scheme members 020 7630 2715


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

Don’t panic about Carillion’s pensions.


The fate of Carillion as a company is in the balance. Up to 20,000 jobs are at risk.

Carillion 2

Bond and equity holders are likely to lose substantial sums. Carillion driven projects are likely to suffer and 28,000 members of Carillion pension schemes will suffer loss.

Carillion’s 13 pension schemes which include such household names as Tarmac, Mowlem and Alfred McAlpine, will probably into the Government lifeboat , the Pension Protection Fund.


Pensioners may get a slightly lower rate of pension increases, those awaiting their pensions will see their pensions cut by 10% (more if they have big pensions). None of this is good, this is not a good time to be connected with Carillion in any way.

There is a group of former public sector workers who may lose out slightly more, as Prospect are pointing out (via the FT).

It is clear however , that members of the pension schemes are protected.


But  it would appear that the situation is complicated by not all of the individual companies being in administration – It would appear that 8 out of the 14 companies in the Carillion Group are not in administration , which explains this statement from tPR


The list of companies in administration is

Carillion Plc

Carillion Construction Ltd

Carillion Services Ltd

Planned Maintenance Engineering Ltd

Carillion Integrated Services Ltd

Carillion Services 2006 Ltd

For a pension scheme to go into the PPF , a section 120 notice has to have been issued following the  insolvency . It is possible that some of the businesses may survive and with them their pensions.

keep calmNone of this is sufficient for people to be alarmed, let alone panic. Even if a pension scheme goes into the PPF, you have strong protections.

The PPF is strong and will be able to absorb the deficit of £580m, even if this deficit is measured another way, it is not big enough to increase levies on other pension schemes (which have been falling fast in recent years as the PPF moves towards being “levy-free” or “self-sufficient”).

We must get used to seeing companies fail. Not all companies that fail pass their pensions into the PPF , BHS remains outside as do others. The British Steel Pension Scheme avoided the PPF. The PPF has capacity and is – if anything -underused.

As this blog has said many times, the PPF is a national treasure. It is invested – not in funds – but by its own investment managers, it is self-administered, it treats its members well and it is a model of good governance. It is one of government’s success stories.

While it is not a good time to be retiring from Carillon, its pension schemes are not badly run. The deficit is not so “huge” as to make the scheme the cause of the company’s financial woes. Indeed the scheme, would, in the normal course of events, have followed a recovery plan to solvency. It may not now be allowed to, but Carillion members should not be blaming its trustees for that.

Carillion’s woes as a company are to do with its debt and to do with business decisions that went wrong. These things happened , not because of some financial credit crunch or global recession – we are beyond these things – but because of a combination of poor decision making and bad luck.

The attrition rate of large companies operating in the Western World is low, not many go bust – Carillion may still not go bust. But some companies will go bust. For every Amazon there is a BHS.

I worked for a time with Alfred McAlpine and got to know a good many of the people who were in its pension scheme. They were good people who built roads, I remember being taught about roads –  I remember the pride with which they talked about environmental considerations. We do not stop needing the skills of these people. They will find new work. The shareholders and bond holders of Carillion will absorb their losses as these holdings are part of diversified portfolios. Few people should have their financial futures dependent on the price of Carillion equities and debt.

It seems to me, the major concern expressed today , is that Carillion has been awarded Government contracts, while in its current financial pickle. This may be a political worry for those who awarded them and may account for the weekend meetings in the Cabinet Office. But this is hardly the cause for panic.

The reality is that Carillion’s current problems are local and manageable. The deferred pensioners and pensioners will get less , but not markedly less (full details here) . The PPF will do what it is designed for. Investment portfolios will absorb losses on Carillion debt and equity and Carillion workers will find new work.

This is business as usual and not the end of the world, even if that is what it feels like, if you work for Carillion this morning. My thoughts are with those who work for Carillion and I hope that any who read this , will take heart that they are not the first – nor will they be the last – who face this situation.

The Pension Advisory Service (TPAS) has set up a dedicated helpline for Carillion pension scheme members 020 7630 2715

philip green carillion

Carillion’s Chair – Phillip Green (no relation)


Posted in pensions, Pensions Regulator, Retirement | Tagged , , , , , | 8 Comments

“Probing” IFAs is not enough; we need simpler more transparent transfers.


Allegations of “mis-selling” against IFAs are premature and unsubstantiated.

My eye was caught last night by a linked in post by Andrew Warwick-Thompson, formerly of the Pensions Regulator.

Here we go again. The personal pensions miss-selling scandal all over again. Per the FCA over 50% (so far) of the advice given to Port Talbot workers was not appropriate. When will we learn that for the majority of consumers a transfer out of a DB pension is not in their best interests?

A sentiment that all right-minded pension professionals could agree on. There are similarities between now and the introduction of transfer values in 1987. But the difference are bigger than the similarities. We have to deal with the present problem in a different way than we did in the mid-90s and we need to use prevention as the best cure.

Andrew’s comment linked to an FT article UK’s FCA to probe thousands of pension advisers after Port Talbot crisis” 

The article quotes the FCA’s (Megan Butler’s) letter to Frank Field (Dec 21st)

 In 2018, we will be collecting data from all firms who hold the pension transfer permission with the intention of assessing practices across the entire market to build a national picture

I replied

To be fair to the IFAs , the FCA surveyed 88 transfers and none of them had anything to do with BSPS. It’s a small sample to condemn advisers with.

It’s good that the FCA are going to continue their investigation into transfer advice, 88 cases is not a large enough sample when Origo reported that over half a million transfers occurred in 2017 alone.

Nor is it good enough to imply that the problem is all about IFAs. I take issue with the FCA’s headline; “probe” is the wrong word, “consult” would be fairer.

In this article, I suggest that the FCA need to look beyond IFAs and consider

  1. How they get (and how whistle-blowers give) intelligence
  2. How whistle-blowers can be better encouraged and supported
  3. The role of trustees and their administrators in providing intelligence
  4. The role of SIPP managers – especially their accountability for the destination of investments
  5. The application of the fit and proper rules to those managing SIPP investments.

It’s a long list – too long – there are far too many parts, too many regulators and a lack of co-ordination around a central purpose. The reason I am writing this blog is that I can find no other account of what has happened at Port Talbot that could enable the Pension Regulator , the FCA, trustees, IFAs , SIPP managers, fund administrators and fund managers to see the problem in one view. It may also be helpful to the Work and Pensions Select Committee as they prepare their report on what has happened at Port Talbot.

The difficulties good IFAs and the FCA have had putting matters right.

The activities of Active Wealth Management came to light because Al Rush and went to Port Talbot at the invitation of the moderators of the BSPS Facebook Groups. It was Stefan Zait and Rich Caddy who drew out attention to problems at Port Talbot, it was the steel workers themselves who put us on to Celtic and Active Wealth management and it was Al and I who brought our intelligence to the FCA.

When giving evidence at the Work and Pensions Select Committee, Megan was asked by Frank Field  ”

Chair: So you went into the plants at dinnertime and talked to the men there?

She replied that she was about to go to Port Talbot – which she did, the next day.

Frank Field asked if she’d been in touch with me and pressed on the mattermegan butler

Actually both Al Rush and I approached the FCA. Al is a Pension Transfer Specialist, I am not – I haven’t been an adviser since 2005 and actually took holiday to go to Port Talbot.

Megan has been charming , courteous and I have congratulated her every step of the way. I am totally behind the work she is about to do with the FCA and I hope that it brings about lasting change that stops the haemorrhaging of monies from good occupational schemes into SIPPs and then to who knows where.

Al and I only lit the blue touch paper and sprung the FCA into action. But had we not done this, Active Wealth Management, with whom the FCA had been dealing since August 2016, would undoubtedly have continued shipping money through SIPPs to Gallium , Vega and 5Alpha.

But Al did not stop there, he went on to set up Chive which has done great things to put wrongs right and provide the counselling to steelworkers that they needed. He has worked with TPAS and has built up a network of like-minded IFAs who have given freely of their time. This has been recognised in New Model Adviser. Looking through the 33 comments on this post, I see praise and support for Al and Chive’s IFAs. But I also see professional jealousy.


Chive did come to the rescue at Port Talbot and they guided the FCA to where the problem was. I actually agree with Megan Butler that she could not reasonably have been expected to have been in “the plants at dinnertime”. She relied on evidence which got passed from steelworkers, though the Facebook pages and IFAs. That is how it works.

The offensive post from Kuchu, quite misses the point. IFAs care about their reputation and the reputation of advice. So does the FCA. But the primary driver in all this is the fate of the money that has left BSPS. We now know that Darren Reynolds himself, helped £40m out of BSPS and into 5Alpha. Chive (and I) continue to lobby for the return of that money to the SIPPs through which it passed (without penalty).

For people like us to act as we do, means we have to take considerable risks. We risk upsetting everyone and getting considerable abuse. Al Rush is one of the bravest people I have ever worked with, he spent much of his life dodging bullets in the service of his country – he has faced worse than Kucho and his whispering friends.

We need to stick up for our whistle-blowers as we need to stand up for our troops.

DB Administration and its shortcomings

I work with other large occupational schemes, some much larger than BSPS. I see they have the same problems as BSPS in preventing the departure of money from their DB sections or identifying where the money goes.

One scheme I am particularly involved with shares the same administrators as BSPS so I can see exactly the problems that Derek Mulholland has. The only direct contact the scheme has in the process is in transferring money to the SIPP. It is the administrator who verifies the IFA has certified the transfer.

The management information that trustees need to identify where there are clusters of transfers around specific advisers (as happened with BSPS), is not available to them in a timely fashion. It takes too long to gather and – when it arrives – it is inconclusive. Trustees can only see half the story. Here is the list of SIPP providers and the amounts they put into Strand Capital (the failed predecessor to 5Alpha).

Gallium SW3

With a couple of exceptions all the introducers are well known SIPPs. A trustee asked to send money to James Hay or Curtis Banks or Intelligent Money could not have known that it might have been lost to Strand. BSPS were sending money to Momentum , Intelligent Money and Fidelity (at Darren Reynolds’ request). They could not have known it would go to Strand’s phoenix – 5 Alpha.

They could and should have seen an unhealthy concentration of transfer activity through Active Wealth Management, but my experience suggests that the MI systems would not have been able to pick up these patterns in short time. Certainly there are lessons for administrators in this.

The screen that divides trustees and the FCA

But there is also a lesson for SIPP providers. I have spoken to SIPP providers who were approached by Strand’s sales team and by Vega Algorithms and said “no”. As one SIPP provider told me “there was no way we were going to have our money going to Strand”.

There is also a lesson for the FCA, who knew of the connections between Strand (which is in special administration) and Vegas and 5Alpha – from the Witness Statement of Joe Egerton (dated 15.05.17) detailing the links between the three organisations.

The SIPP providers are effectively a screen dividing trustees and the FCA. Trustees can see the SIPP providers (and the advisers using them- eventually). The FCA can see the asset managers to whom money is directed – but not the origination of the money.


A more open transparent system is needed.

This article started by looking at the lack of understanding of a former pension regulator; it looked at the problems facing the FCA in getting intelligence on Port Talbot, the issues facing project Chive and the distrust many people have with the motives of whistle blowers.

The article goes on to look at the difficulties trustees have finding out what is going on, the problems administrators have providing timely MI, the inability trustees have to see the probity of the investments made by SIPPs (under instruction from advisers)

Finally it looks at the problems the FCA have tracing the origination of monies arriving at fund managers like Strand and 5Alpha because of the lack of transparency created by the SIPP screen and the opaque structures of certain investment structures.

My conclusion is that the FCA need to look at the problems with transfers holistically. They cannot simply look at advisors, they need to talk with SIPP managers and the fund administrators and managers behind them. They need to get the other side of the SIPP screen and talk to trustees and their administrators. We need better intelligence and that means enabling trustees and administrators to bring intelligence to the FCA’s attention in a timely way.

Above all , we need to make whistle blowing an activity to be encouraged. To my mind the comment of “Kucho” is akin to racism or homophobia , a kind of hate crime that should not be tolerated.

Project Bloom – which brings together the enforcement activities of the FCA, tPR, the police and Action Fraud, is a closed book to those who pass information to it. Again and again, those who report to Action Fraud, get no feedback, no thanks and no support. They watch the train crash and are barred from making public comment lest they be accused of “tipping off”.

The system seems set up to allow the regulators to operate a closed shop. While I support Megan Butler , it was right that Frank Field called her to account and it is right that I and others continue to demand action on 5Alpha and its infrastructure.

I hope that this blog, and others like it will bring about lasting change and not just dump the problem on IFAs – who I consider are being made unfair scapegoats for a much wider failing.





Posted in Blogging, BSPS, Change, FCA, pensions | Tagged , , , , , , , , , | 3 Comments

For all the noise-news from BSPS is good!

Yesterday saw a number of documents published and statements made, confirming  findings in Port Talbot but leaving many questions unanswered.

But for all the noise, news published at the end of this blog is good- very good – it should make us  breathe a sigh of relief and earns BSPS Trustees, my congratulations.

port talbot 4

Port Talbot and the Tai Bach Rugby Club (in red)

We’re learning that what we suspected was true

At first sight, the letters and statements appearing on the Work and Pension Select Committees’ website, are useful in confirming what amateurs had already discovered

We learn that Celtic Wealth Management had a large number of introducers within the Port Talbot Steel Works and that it earned £700 a lead for work passed to Active Wealth Management.

We learn that Active Wealth Management advised on around £40m of BSPS Transfers, that the average CETV advised on was £400k and the largest twice that. Anything between 90 and 100% of transfers were arranged on a contingent basis and the upfront advisory fee charged by Active was £1500.

We learn that there is an 8th firm that has closed its doors to transfers as a result of the FCA’s review.

In a further statement from the FCA published yesterday (but not own the BSPS website) it is reported that the FCA are looking to extend its activities to probe all transfers and that 45 further firms will be subject to investigation.

What is clear from Frank Field’s statements on the W&P website is that he is far from satisfied , either by the letters from Celtic and Active Wealth or by the responses of the FCA.

The responses raise a series of further questions about the FCA’s actions in regard to the BSPS, which the Committee will be pressing them further on:

FCA intervention in British Steel Pension Scheme

The timeline of FCA intervention in the BSPS saga, including specifically in relation to Active Wealth.

Although it is apparent Active Wealth  was already on their radar, the FCA first contacted the firm about the BSPS specifically in November 2017 – two months after BBC investigators presented it with evidence they had uncovered on Active Wealth and Celtic Wealth.

The FCA had requested case files and outlines of business processes from Active Wealth between August 2016 and February 2017, leading to a visit by the FCA in July 2017. As a result, Active Wealth’s director Darren Reynolds agreed not to recommend any “non-standard assets” to clients. It is unclear whether this means that Active Wealth had been recommending “non-standard assets” to pension transfer clients before July 2017.

The FCA finally required Active Wealth to cease advising on new pension business 14 months after it first started digging, and just weeks before the original deadline for BSPS members to make a decision on their pension.

Active Wealth’s reductions for early retirement

The description by Active Wealth of the Scheme’s reductions for early retirement as “taking a penalty” and “suffering a penalty” raises the question of whether they were using this pejorative characterisation of what is actually simply an actuarial calculation in their advice to clients.

Size of transfers and fees

Questions remain over the actual size of transfers handled and fees received for them. The highest transfer value that Active Wealth handled in respect of BSPS clients was £790,404 and the average was £398,347  – representing upwards of £40 million transferred out of BSPS on their advice alone.

Active Wealth state they advised over 300 clients on BSPS transfers, “around a third” of whom acted on that advice to transfer out. Their director Darren Reynolds failed to answer the specific question of how many in total of those 300 plus individual pension savers were advised to transfer out of the “gold-plated” scheme.

The highest and average fees paid to them so far described as £1,500 and £1,443 respectively. The fees seem very small relative to the huge transfer values and it is unclear how many BSPS clients signed up to an ongoing adviser charge or what that might cost them ultimately in total.

Field concludes

“I have already described the FCA’s action on BSPS as grossly inadequate, and these responses do nothing to increase my estimation.

The FSA was reformed and renamed amid concerns that it was too close to the financial businesses it was supposed to regulate. From their intervention in this affair it seems clear that the FCA’s actions still effectively protect these businesses’ ability to make money out of pension funds, rather than protecting pension savers. They must take care they are not sleepwalking into yet another huge misselling scandal.”

What we aren’t learning

Nothing above is new, the dribble of firms voluntarily resigning their capacity to transfer extends, the tone of the FCA’s (unpublished) statement , is considerably more robust, but such developments are to be expected.

We still have no idea why Darren Reynolds and Active Wealth Management chose to invest money into 5Alpha, via Vega Algorithms’ DFM, why he was charging so much below the market rate for transfers and nothing at all for ongoing advice. We don’t know why the redemption values offered to Vega/5Alpha investors are so much lower than the amounts invested. We don’t know which classes of 5Alpha shares were purchased (or why) and we have no idea whether the marketing fees that 5Alpha can pay, were paid.

5Alpha , confusingly – has been removed from the Newscape website. Fortunately , I have a copy of the “supplement” prospectus, from which this extract is taken

If investors want an update on the progress of its plan since inception, they can use Bloomberg (5Alpha is represented by the orange line and is compared to the global equity index (red) and FTSE 100 (blue).



On the face of it, Darren Reynolds undercut the advisory market while investing members in funds that were to put it mildly – obscure. The fund has already built up a formidable history of under-performance. Ultra Conservative maybe – but hardly living up to its billing.newscape bloomberg

If we can accept that AWM and Celtic did not take these distribution fees, we must assume they have not been paid. Hopefully this will be reflected in the full return of monies invested through Vega (by Gallium).

Reynolds’ letter goes at length to reassure the Committee that he uses the most sophisticated risk management techniques, which…

 involves looking at the strategy and track record of the fund manager and the funds under consideration, and to analyse a range of metrics, including common measures of volatility, such as standard deviation, and of risk-adjusted returns, such as the Sharpe ratio. We also consider Sortino which is a variation of the Sharpe ratio which distinguishes downside volatility from overall volatility. It uses an investment’s standard deviation of negative returns, often referred to as downside deviation or semivariance

yet the fund into which Vega’s DFM invests – 5Alpha was seeded from Strand Capital, a fund that is currently in special administration. The performance of Strand and 5Alphas is right at the bottom of its sectors and the costs that are incurred in the management of the Vega DFM , the fund and sub funds it invests in , not to mention the fees charged by Gallium , the SIPP providers and Vega itself, make an investment into 5Alpha a total nonsense.

What possible reason had AWM (and others) for investing client monies in Vega?

We now know that Active Wealth Management has been under the FCA’s surveillance from August 2016, we know that Strand Capital has been in special administration since May 2017. It really is time that we started to make sense of why AWM were investing as they were, why most SIPPs refused to have anything to do with Strand, Vega , Newscape of 5Alpha and why AWM were not charging the market rate for what they did.

Put another way, if AWM were paying Celtic Wealth Management £700 per case, and only charging the client £1500, how could Darren Reynolds afford to do business?

Would it not have made more sense for AWM to have simply used the TATA Steel workplace pension , at a fraction of the cost , with a guided pathway and at no regulatory risk ?

Finally some good news

The first cut of numbers suggest that a very high proportion of the BSPS members who made a choice have chosen to move to BSPS2. Some will have deliberately chosen PPF (for better early retirement and tax free cash). Some will not have chosen as they had already transferred. For some the impact of choice would have been so marginal, making a decision was not critical.

And of course some members will have voted more than once – a problem with the lag in communication resulting from using paper.

These numbers are an early indication and the Trustees will be making announcements once a proper audit has been conducted.

But of this,  the Trustees of BSPS have a right to be proud. They have conducted themselves with integrity throughout and look as if they will be rewarded with the confidence of the general membership.

I stated in a recent article that the trustees had lost the confidence of members and these figures who that I was wrong – or only partially right!  What I saw in Port Talbot was not representative of the total membership, the disaffection with BSPS – was not a disaffection with the Trustees, but broadly with TATA.

I am very happy that such a high proportion of BSPS members have taken good decisions and congratulate the trustees and management of BSPS for what is looking like a result.

Nonetheless, there are lessons to be learned from the Facebook pages of the members and Frank Field’s comment that the trustees were  in “another country” (I had previously remembered “a different world”) is justified – at least in terms of what happened in Port Talbot.

Lest the Trustees become complacent, they should consider that many who have yet to complete their transfer, have elected to join the new BSPS, in case the CETV is never actioned.

From what I am reading on the pages, there is still considerable anxiety that pipeline transfer applications will not be submitted by the administrative deadline of February 16th and that many CETVs will not be paid by the RAA cut-out date of March 29th.

Until the very end of the Regulatory Apportionment Arrangement, the Trustees will not know for sure how much of the BSPS fund has transferred away.

Until we have answers to the questions that remain outstanding over AWM, many who have transferred will remain in darkness.

Until we have a rethink of the way that ordinary people are presented with decisions over their pension rights, that enables them to make informed decisions into products with predictable outcomes, we will have more Port Talbots.

Latest estimates are that there are only 3,000 advisers in the UK – qualified to give transfer advice. Mercer estimate that since April 2015 over 200,000 people have elected to transfer.  We can only speculate over the number of CETVs which weren’t taken up.

This suggest that on average, a Pension Transfer Specialist has advised 65 clients to transfer. If we are to believe the FCA’s own research , that only 47% of transfers were suitably advised, then we must see Port Talbot as the  visible tip of a very large iceberg.

Good news for the steelworkers – but the fundamental problem remains



Posted in BSPS, corporate governance, dc pensions, pensions | 2 Comments

Tough choices for our Pension Minister

Guy opperman tweet

Despite the reshuffle, our Pension Minister, Guy Opperman is staying our Pension Minister.

As pension celebs go, Opperman has been – so far – decidedly B-list; there is only so much time a Pensions Minister gets to acquaint himself with his job and – as recent tenure has shown- that time can run out. The list of ex-pension ministers who never quite got round to doing anything is growing longer.

So far, the only firm commitment Opperman has given is to the Pensions Dashboard. He intends for it to be, not the series of data standards envisaged originally, but a utility run and managed by the DWP. This is, as I have said on this blog several times – a vanity project – destined to fail. It is also a blocker to the very real challenges that exist within pensions which are not glamorous , but are pressing.

At some point in the next 12 months, Lloyds Banking Group’s Trustees will be taken to court by its (unrecognised) union to determine what will be the position for occupational schemes with regards GMP equalisation.  The legacy of 40 years tinkering with the interaction between state and occupational pensions is unlikely to go away any time soon.

This year we will also see Pension Wise disappear and re-emerge with a new name, under new leadership bringing together TPAS and MAS. This reshuffle looks like absorbing considerable energy , though one wonders to what great effect.

And while all the deckchairs are being moved, there is a very real considerations for the Pensions Minister , one that demand more than a briefing from his civil servants.

The decision of 140,000 postal workers to defer a Christmas strike on the expectation of reaching a settlement of  their differences with Royal Mail has yet to prompt comment from Guy Opperman.

This is surprising. The current truce could be broken as soon as it becomes clear that Royal Mail cannot implement a CDC scheme because there is inadequate regulation for them to do so.

In my opinion, if DWP fail to act on the reasonable expectation of postal workers that they can have a DC scheme that allows their current pension contributions to accrue them a CDC pension, then blood will be on its hands. There is a very real expectation that the secondary legislation promised in 2015 but never written, will be completed with some urgency.

A tough choice for Guy Opperman

While the Pensions Dashboard is glamorous and even sexy, turning pension savings into pensions is not. As Hargreaves Lansdown’s submission shows, creating collective rather than individual DC schemes will ignite the wrath of the insurance and SIPP industry, who have their snouts buried in the swill of pension freedoms.

But the needs of the unadvised “silent majority” of whom the postal workers form a significant part, have not been met by the Financial Advice Retirement Review and the innovation sought by the Retirement Outcomes review is nowhere to be seen. Instead we have increased concern, crystallised by the issues facing BSPS members in their Time to Choose, that there is simply no obvious exit route from what is considered the burning building.

CDC is not designed to de-risk accrued Defined Benefit liabilities, but it does represent a better mass-market alternative than a self invested personal pension – for those who cannot stomach staying in their employer’s scheme a moment longer. Not only is CDC an alternative for future accrual, it could be a pragmatic alternative for a very large amount of money , currently in the wrong kind of SIPPs with the wrong kind of management. I speak with feeling as I have seen these products close up and the stench is still in my nostrils.

In creating a way for DC schemes to pay scheme pensions, the Minister can enable the great new master trusts that are taking the money from auto-enrolment, to provide the guided pathways into retirement, they have been asking for. CDC is the obvious retirement solution for the workplace retirement saver,

It is touch for an inexperienced Pensions Minister to take choices , especially when it means forsaking a project that only last month he was congratulating himself on. But I think it is time to say this loud and clear. The DWP must prioritise the present needs of the Postal Workers and help create a scheme fit for those who are currently stuck in products entirely unfit for purpose.

In doing so , they should not forsake the pensions dashboard, but return to the original conception – laid out by the Treasury last year – of limited intervention and maximum facilitation of market driven innovation.

In place of diverting the DWP’s limited resources into trying to build a digital annuity, the DPW should grasp the nettle and complete the work needed for CDC schemes to operate. There is resource at hand from the private sector to make that happen (if needed).

Let’s see the Pensions Minister stand up and be counted as a friend to the postal workers and those whose pension rights languish in inappropriate products.

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

Cauliflower steaks and their wrappers

CAULI -GOSH!cauli gosh

Marks & Spencer have withdrawn their Cauliflower Steak product after an outcry from the public that at £2.00 for a third of a cauliflower, it represented poor value compared to a whole cauliflower available at £1.00.

Today Mrs May is launching a 25 year plan to reduce the environmental damage created by overly packaged food- products. The Cauliflower Steak may have fallen foul of Mrs May’s campaign against wrappers!

Will Mrs May extend her campaign to financial wrappers?

Dressing up a commodity and re-selling at a premium price is what good marketeers do. It is what Hargreaves Lansdown do better than anyone, and the wrappers they use don’t do damage to the environment.

I mention HL because they have given CDC a hard time (very expertly). If I want to buy a share for £1.00, I can do so – but I have to do all the preparation myself. Or I can buy that share for (a notional) £2.50, wrapped up in Vantage.

I don’t mind paying lots of money for Vantage, so long as I’m getting value for money. That Hargreaves Lansdown are one of the most successful packagers of financial cauliflowers there has ever been – is beyond doubt. People value their wrapping.

However, I think Mrs May  right to encourage people to buy Cauliflowers whole (from the market) without the wrapper and at the lower price. People could use the saving to pay more into their retirement plans!

Marks & Spencer, Harrods Food Hall and Selfridges all give those who are affluent, the right to shop exclusively – knowing that the products are reassuringly expensive (except at about 6pm when the yellow-label brigade go shopping!).

Market stalls and Mark and Sparks can both flourish!


M&S v the Market Stall


But we need our market stalls, to provide good quality food , without the fancy packaging and at a price that “hard-working-families” can afford.

I will encourage the rich to shop at Hargreaves Lansdown – for much the same reason- you meat a nicer class of shopper on their sites.

Meanwhile, I’ll be shopping for my financial products, unwrapped and a little dirty, on the CDC market stall!

You can make your own mind up! Both my submission and Hargreaves Lansdown’s submission to the W&P Select Committee are on this blog. And they’re the only two published by the Work and Pensions Select Committee itself!

Incidentally my blog has got more negative votes than any other I have published!

Why Hargreaves Lansdown want to put out CDC’s little flame is beyond me, Market stalls are no threat to Marks and Sparks and CDC is no threat to Tom and his team in Bristol.

Posted in pensions | Leave a comment

Bring back Ros! (with a twist)

Convictions before careers

“Social mobility matters to me and our country more than a ministerial career. I’ll continue to work outside of government to do everything I can to create a country for the first time that has equality of opportunity for young people wherever they are growing up.” – Justine Greening

I don’t know Justine Greening (and her words may be hokum) but that she turned down a cabinet position as she did , suggests she’s more a conviction than a career politician.

Having lost her seat in 2015 and regained it in 2017 (inheriting George Osborne’s 14,000 majority in Tatton), McVey has now got the chance to show she’s more than a “super sub careerist”.

Sign on, sign on, with hope in your heart..

Esther 2

We do have a new Minister for Work and Pensions.


I don’t know much about Esther McVey – she’s the first woman boss at the DWP since Harriet Harman and it’s an irony to have a scouse in charge at the social.

That said, with 7000 Liverpudlians on the wrong end of the bedroom tax, our Esther’s not got the greatest of reputations in her home town (see comments on her appointment in Liverpool Echo).

Debbie Abrahams (McVey’s shadow) welcomed her to the post

“In her time as Minister for Disabled People, then Employment, Esther McVey was a key architect of the most draconian and incompetent social security reforms this country has ever seen.

So much for a honeymoon period; Abrahams concludes…

Her failure to make work pay through Universal Credit with 2.6m families now losing up to £2,100 a year, record numbers of working people living in poverty and more disabled people in poverty since 2010 are testament to her record of failure.”

“The boss for DWP” has become a dud job, not because of the pensions piece but because of Universal Credit. In a magnificent piece of work, Gareth Morgan (aka the Ferret) has demonstrated  the issues that “most” older people have with pensions.

It is absolutely critical that we have universal credit working for those who cannot . To give but one example of the failure of UC , look at the abject failure of this policy…

So how does this work for pensions?

Guy opperman tweet

It’s about time our current minister for pensions and social inclusion moved on. He’s been in office long enough to nail his colours to the pension dashboard (ludicrous folly). He’s been tweeting away over the new year.  Sadly for pension folk, none of these tweets are about pensions.

Infact – looking at his twitter profile, you’d be hard-pressed to guess he had any interest in retirement at all. He’s the least “pensions” minister Britain has ever had and he’s showing all the signs of wanting to move up the greasy poll.

The last time I had a meeting with the  Pensions Minister, Richard Harrington told me how committed he was to seeing through the job. I met him again a few months later at the Tory party conference “oh no – not you – no talk about pensions!”.

The first (and only) time I met Guy Opperman, he told those us how committed he was to seeing through his job.


“Other camera Tapper”

He came across to the House of Lords to dish out some certificates for TPAS and tell us about his work with credit unions.

I haven’t seen him since

DWP months in office

If Guy Opperman remains in his current post, it will be more out of sufferance than conviction.

Bring back Ros!

It is about time we had someone in the Pensions hot seat who is prepared to deal with the many and varied issues facing pensions people. Ros Altmann was our Pensions Minister, she left office and her position has since been downgraded, but she knows her stuff. She may not always be right (IMO) but she is someone who puts conviction before career.

David Gauke may not have known much about pensions but he had enough time at the Treasury to know a bit about money. Esther McVey could do with Ros Altmann back to revive the position of Pensions Minister. There are huge challenges facing her – relating to the parlous state of DB pensions, the impending hikes in contributions through auto-enrolment and the demands of Royal Mail and CWU for the rules for CDC.

Having spent a year getting Harrington up to speed and another 6 months trying to find Guy Opperman, it is high time we had a pre-baked pension specialist in the role.

For all her faults – bring back Ros!

This works


There was a moment this afternoon where we all thought things were going to change,

First thismalthouse.PNG

Then this mail 3

But Guy Opperman keeps his job.

No new Pensions Minister as Guy Oppermankeeps his post. But two women in the department have been replaced by men AlokSharma is Employment Minister and Kit Malthouseis in an as yet undetermined job.

— Paul Lewis (@paullewismoney) January 9, 2018

Funny that because I thought it was “absolutely true because I read it in the Daily Mail

Posted in corporate governance, DWP, pensions | Tagged , , , , , | 3 Comments

Save money and party – it’s the best way!

There is saving gene in our DNA. I haven’t  firmly identified it from the human genome project  but I think it’s the black ball just to the left of the light blue one second coil along.

human genome

can you spot the saving gene?


Well there has to be a saving or hoarding gene, otherwise so many of us would save or hoard our money when we would be much better off buying daily supplies of Magnum Ice Cream.

Magnum Ice Cream - Classic - Almond - Chocolate Truffle

not a sponsored ad

I was in the Co-op at about 8.30pm yesterday and I was faced with the choice of purchasing chocolate ice cream or having an untouched five pound note in my back pocket. I chose the latter. This was not a fitness thing, it was that little black dot asserting its way in the genomesphere.

This is why this tweet is so wrong.

I don’t have the ludicrous Annamaria Lusardi on my twitter feed but if I did I’d mute her. She is wrong, wrong , wrong!

The last thing you need when you have no money is to have some educationalist telling you not to smoke, or drink or eat the new 10 packs of Magums (with the different flavours and the diddy sticks).


Glesga pointing something else out!

It worries me that my good friend @glesgabrighton was found promoting Lusardi’s educationalism.

I fear he has a an extra frugality gene in his genome (maybe a national characteristic but I don’t want to be banned for racial slurs).

The research Lusardi is pointing to is here. The Wall Street Journal produces really great pictures; like the one below.





a truly happy man – expanding into his 401k retirement plan

When I saw the corpulent corporatist, my reading was that he’d “expanded” into a narcoleptic torpor due to the feather-bed of his 401(k) “pension” plan.

Maybe I ought to have my genome corrected by Rory Sutherland or some other behaviourist – maybe I’m aberrant. But this is precisely what the Wall Street journal article is going on about.

With more in savings, auto-enrolled employees may also feel wealthier and able to afford a larger home, Prof. Madrian said.

Prof Madrian is what the article calls a “retirement scholar”. She has the same views as Prof Choi who is presumably a “getting into debt scholar”. He has found that

A bigger mortgage can put homeowners at greater risk of default if home prices decline or the owner suffers a financial setback, he says. But in recent decades, the long-term trend is that “homes have been appreciating assets” and having a higher 401(k) balance and a bigger mortgage “is not bad and possibly even good for net worth, depending on what the housing and stock markets do.”

Put that in your pipe and smoke it, Annamaria Lusardi (if you had a pipe- which I’m sure you don’t as weed is also bad for you).

You can have cake and eat it – if you work hard

The amazing conclusion of the Wall Street Article is that saving through an auto-enrolment retirement plan makes you more financially self-confident so you go out and buy a bigger house and you work a lot harder and smarter to pay for all this. In other words, you earn to get fat and fall asleep after a good lunch like the splendid fellow in the picture.

You do not have to be in charge of the human genome project or even a retirement scholar to work out that setting yourself tough financial goals, like saving proper amounts for retirement or living in a nice house, leads to success at work.

When I started out , John Ellison, my sales manager made me buy a brand new golf GTI (D85 EYP) which remained my reason to do 20 sales appointments a week for the next three years. His #2 Jasper Gundry-White marched me round to Jaeger in Regent Street and required me to buy a nice “whistle” and several expensive shirts and ties. I was immediately overdrawn . I have never blamed them for auto-enrolling me into penury!

I am very wary of underweight people as I suspect them of extreme parsimony. I fear they do not consider the Magnum option and financially educationalise their children from an early age. They are the Flanders and I will remain a financial Homer.flanders and homer

Financial Education has been abused by these parsimonious “thinnifers” who preach that we should not enrol the poor into pension plans (well not without the financial education they need to avoid buying Magnums at the same time).

I have recently joined the ever-swelling ranks of the “fattipuffs” who consider you can have your cake, eat it, have a mortgage and save for your retirement, so long as you are productive and good at what you do and stay honest.

The simple dictum – work hard- play hard, trumps all this silly saving nonsense. My appalling lifestyle decisions (I purchased a nice bottle of wine with the money I didn’t spend on Magnums) will result in my early demise. The CMA tables are full of fattipuffs like me and we will provide a solution to the longevity crisis yet!

I may not die thin, but I will die happy – and I’ll die solvent





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

It’s not just IFAs that should be livid!

two stories

Here is the note I wrote when I read New Model Advisers report

  1. On why FSCS cannot determine its current levy (uncertainty over Strand Capital)
  2. On why FSCS has to unravel its past compensation (uncertainty over Arch Cru)

Today (Jan 4) FSCS published its Outlook for 2018. Last year’s levy of £100m has been increased by £24m to cover the cost of failed investments in Self Invested Personal Pensions. Deep in the Chair’s statement is an admission that FSCS can’t share any rebates to IFAs because of uncertainty over compensation payable to customers of Strand Capital.

IFAs will be surprised to know that Strand Capital’s management and ownership is shared by another fund that has been much in the news lately – 5Alpha, into which the majority of the transfers from BSPS by Active Wealth Management were invested.

100% of Strand Capital and 48% of the Vega Algorithms Discretionary Fund Manager (DFM(currently 100% invested in 5Alpha is a company called Optima Wealth Group (OWG). The manager of Vega Algorithms, of Strand Capital and until recently displaced of 5Alpha, is Steffen Hoyemsvoll

5Alpha has been recently been analysed by a leading funds expert who has delivered a demining verdict on its structure, governance and sustainability.

How can the manager of a fund that is currently FSCS’ major problem, be back managing a DFM and until recently a fund at the centre of another controversy within a few months?

How can the FCA have failed to spot the common ownership of Strand and Vega by OWG.

How must FSCS be feeling to discover that Strand’s phoenix “5Alpha” is busy taking money from steelworkers in Port Talbot.

And how must FSCS feel that Stephen Decani , CEO of Newscape, the owner of 5Alpha was was a Senior Partner and Head of Strategy and Distribution at ARCH Financial Products LLP, where he was responsible for deal origination and structuring, and for a team of strategy and distribution professionals.(Bloomberg)

I wrote the note to simplify the issue for a friend who is doing some work on this subject. The sad fact is that it’s not just FSCS who will feel the pain of Strand and Arch Cru, it is the IFA community and the people they support.

This point is made well by the excellent Ken Davy who calls the FSCS levy a “disgraceful injustice“

This totally arbitrary and ridiculous system which virtually everyone recognises is a broken model must be radically changed by the FCA without any further delay.”

FSCS is to advisers what the PPF is to occupational scheme, a levy paid by the good on account of the bad. It introduces moral hazard into the mind of the already unscrupulous . When the management of Strand Capital or ARCH Financial products decide to bail out, they can walk away and start again. Strand became 5Alpha, Newscape was born out of Arch Cru.

While the management of Strand are now raking in 0.66%pa of assets in the Vega Algorithms (sole investment 5Alpha Ultra Conservative), Newscape host 5Alpha as a SICAV on its Dublin fund platform.

Potential investors in “My Workplace Pension” were advised their money would be managed by Strand Capital

The lead managers for Strand are Hamilton Keats, a physicist and statistician from Imperial College London and Steffen Hoyemsvoll a physicist from University of Oxford

You might think that giving your money to a couple of egg-heads straight out of university was a bit risky but don’t worry

Strand Capital Limited is  authorised and regulated in the UK by the Financial Conduct Authority under reference number 494001. Strand Capital is part of Optima Worldwide Group which is has interests in asset management, merchant banking, security, natural resources and agricultural sectors as well as providing professional services and advice to Governments, Companies and select individuals in the UK, Middle East, South Asia and Africa.

Who owns my workplace pension? Well the BBC investigated it and found

MWP Pension Ltd is a company appointed by My Workplace Pension to do marketing for it. According to Companies House, it is 50% owned by Gavin McCloskey.

Gavin Mccloskey was company secretary and director of  Bespoke Pension Solutions


While the names aren’t quite the same, isn’t it odd that Gavin and Sean handed over to a certain Clive Howells, who has since become famous for giving not chicken in a basket – but sausage and chips to Port Talbot steel men – before introducing Active Wealth Management.

Isn’t it odd that Active Wealth Management’s advice to those Steel workers was to invest the transfer of BSPS rights in Vega Algorithms? What a weird coincidence that the manager of Vega Algorithms is Steffen Hoyemsvoll (see Strand Capital above), that 48% of Vega is owned  by the Optima Wealth Group (see Optima Wealth Group above) and that according to research published in Money Marketing

Asset management conglomerate Optima Worldwide Group purchased Strand in 2014, and made an investment into the company to develop an algorithmic trading platform.

This went live in February 2016. Before then, Strand Capital only arranged investments in Optima bonds, but these tailed off “as alternative investment products were introduced by the company” the administrators say.

A company called 5Aplha provided IT services to Strand. The administrators say that around November 2016, a “significant portion” of Strand’s investments were moved to the Irish domiciled 5Alpha Adventurous Fund and/or Conservative Fund.

Justin Cash’s report of the demise of Strand shows that its management locked themselves out of their own computer systems , leaving assets and unit owners floundering!

This would be vaguely comical if it were not that there are real people who own Strand units. That FSCS is currently unable to finalise its levy as it seeks to sort out the mess left when Steffen and Hamilton turned out the lights and that all the aforementioned now appear in the Port Talbot train-crash , played out over the past six months.

The most frightening document of all , is the Smith and Williamson joint administrators report itself, not for the incidental detail above , but for this.

Trading background

 In September 2014 Mr Hamilton Keats was appointed director of the Company, and OWG invested funds into the Company to support the development of an algorithmic trading platform.

 5Alpha Limited (“5Alpha”) provided IT services to the Company, in particular in relation to the development and maintenance of the algorithmic trading platform. No formal contract for services appears to have been entered into between the Company and 5Alpha. Mr Hamilton Keats was also the director and largest shareholder of 5Alpha.

 Until May 2016 the only investments arranged by the Company were in OWG bonds. However, investments in OWG (optima worldwide group)  bonds slowed thereafter as alternative investment products were introduced by the Company.

 The algorithmic trading platform went live in February 2016, and from circa May 2016 the Company began using the algorithmic model to pick investments on behalf of clients. Around this time the Company’s online platform also went live, which provided clients with access to their individual investment account details.

We might well ask why Strand was invested in bonds issued by the company that owned it

In January 2014 the Company was acquired from Mr Martin McNally by Panacea Corporate Services Limited, and was subsequently transferred to Optima Worldwide Group Plc (OWG).

But it seems to be out of the frying plan into the fire…

Until November 2016 the types of securities selected by the algorithmic model could be broadly categorised as relatively conventional, on the basis that they were typically listed on the London Stock Exchange.

Around November 2016 a significant proportion of the security investments were transferred to one or both of the following UCITS (“Undertakings for Collective Investment in Transferable Securities”):

1. 5Alpha Adventurous Fund; and/or

2. 5Alpha Conservative Fund

Both UCITS are sub-funds of Newscape Plc and are open ended investment companies with variable capital. This means they are professionally managed collective investment funds whereby investors receive shares in the fund, to be subsequently redeemed at a time suitable to individual investors. Both 5Alpha Adventuruous Fund and 5Alpha Conservative Fund are traded on the Irish stock exchange.

Its into these very funds that Active Wealth Management have been pouring the monies of the Port Talbot Steelworkers (via various SIPPs). The SIPPs are not inconsequential in this for Smith and Williamson also tell us

We understand that SIPP providers and Pension Trustees are the Company’s clients, as distinct from the underlying beneficial investors

Well here they are  – the asset owners of Strand.Gallium SW3

All reconciled, unlike the assets – the OWG bonds (especially the D bond)

Gallium SW2

And here is where the payments arrive and depart.

Gallium SW1

Plus ça change

I wish I could draw a line under Strand as easily as I drew a line under those accounts. I can’t. Vega Algorithms is an appointed representative of Gallium and invests in a fund run by a former director of Arch.

5Alpha is now managed by Newscape’s James Hutson but Steffen Hoyemsvoll is  still at Vega. Hamilton Keats is still listed as a Director of 5Alpha and of Strand Nominees though his linked in profile makes no mention of Strand (nor does Steffen’s).

OWG is still issuing corporate bonds (series D) and enjoying its share of the success of Vega Algorithms.

Newscape is still being instructed by Gallium on shares purchased with money advised by Active Wealth Management and “owned” by Active’s recommended SIPPs. This money is in part coming from “self investing individuals” but the decisions on share classes , exit penalties and dilution levies appear to be taken at a business to business level.

Investors are trying to work out exactly what they have rights to , by way of a return of their money or what they are likely to be paying for its management. What was “5Alpha” has changed its name

Newscape Global Multi-Asset Conservative Fund (previously 5alpha Conservative Fund)

Hopefully, as well as updating the name, Newscape will update the link so investors can see their newly renamed factsheets and fund prospectus.

Plus ça change, plus c’est la même chose

If I was Ken Davy, if I was an IFA, if I was a SIPP manager and if I was anyone who had to pay a part of the FSCS levy (which is practically everyone in one way or another) I would be livid. I am livid!

Plus ça change, plus c’est la même chose just isn’t good enough. Optima’s offices are a few hundred yards from me, Vega is a couple of stops down the line in Kidbrook, Newscape are close by me too. Gallium 20 minutes by train in Sevenoaks.

While everyone else picks up the tab, the various characters in this blog carry on regardless. Smith & Williamson’s report  makes no allegations and nor does this blog. It is not for us to regulate or prosecute.

But as FSCS payers, we should all be justly irate that it is ArchCru and Strand that are the principal reason for the FSCS levies exceeding their £100m limit.

FSCS is the PPF of the retail world. The Pensions Regulator is accountable for strain on the PPF and the FCA is accountable for strain on FSCS.

I am with Ken Davy and with every good IFA I know in demanding that more is done to protect FSCS. So long as the incompetence and insouciance that is displayed by this blog, in the Smith and Williamson report, in the FSCS outcomes report and in the various articles quoted – continues; confidence in our financial system will remain damaged. Worse, people will continue to be ripped-off

If you have read this blog, this far, you may be asking whether much is changing.

Posted in accountants, advice gap, FCA, governance, pensions | Tagged , , , , , , | Leave a comment

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

tata steel.PNG

Available to all Tata Steel workers.


It I’ve been in correspondence with a steelworker who wrote me this

Over the past few months when my work colleagues at TATA have been talking about transferring out I suggested the TATA Aviva Plan to them as it is a good DC scheme with very low charges.
They have been to see their IFA’s and are transferring to other good companies like Liverpool Victoria, Royal London etc.
I have considered transferring to Aviva myself and actually started the transfer process but after doing a lot of research online from various sources (including Pension Playpen) I cancelled my transfer to move into BSPS2 instead. I hope I’ve made the right decision as if I decided to transfer out of BSPS2 in the future, transfer values will be lower?
I, like many others have increased our top up contributions (through salary) into the TATA Aviva DC Plan as we benefit from tax relief and lower national insurance. We can access our Plan account information online through Aviva’s excellent website and although the account was only opened in approximately April 2017 the balance is now becoming substantial.
As you have said in one of your previous blogs (Commission – the charge that dare not speak its name),
 I would like to think that TATA have chosing carefully and are keeping a watchful eye on where our money is going as over time there will be large amounts building up in these DC accounts?
I have some reassurance in this as we received information from TATA about the Aviva Plan in March 2017 which included
It is rare to hear someone trusting TATA to do the right thing by staff. Having researched Aviva’s workplace GPP for some years, Pension PlayPen can endorse it as excellent, it has a good IGC and it rates highly for its investment and at retirement options. TATA took advice on the plan from Thompsons Online Benefits and negotiated a keen discount for members. TATA has done everything right and this plan offers stunning value for money relative to most options available to members transferring out of BSPS.
The plan accepts transfers from occupational pension schemes (including BSPS) and could have been a default option for those who wished to transfer advisedly but invest using a guided pathway (the Aviva Lifestage Approach). The plan even has its own financial adviser!
This gentleman cancelled his transfer because he sensed more conviction in the future of BSPS2.
In another mail he points out
I think a lot of people who have asked for their British Steel Pension transfer value quotations didn’t consider the Aviva Plan as it was right under their noses and they overlooked it? As you quite rightly say, this should have been promoted by TATA to those exercising their CETVs
Aviva have previously stated that they haven’t actively promoted the fact that the TATA Aviva GPP can take CETVs as they don’t particularly want to be seen to be encouraging DB Transfers.

Just how confident are we in our DC plans?

I get why TATA and Aviva did not want to be seen to be intervening.  But had the TATA workplace pension been used as a benchmark against which the solutions put to those transferring away , what would have been the outcome?

  1. Would it have prevented advisers promoting inappropriate investment options?
  2. Would steel-workers have spotted a good thing and flocked to the safe harbour?

I think the answer to both those questions is no. Even if you go to the TATA Steel Personal Retirement Savings Plan website, (hosted by Aviva), you get no sense of the value that plan offers.

The plan’s charges only a third of what someone working in a small company would pay for the same thing. The default fund is available to members at an all in 0.26% pa charge!

The nearly 0.5% pa saving on the standard 0.75% charge for this fund , negotiated by TATA,  is equivalent to over £200 pm on a £500,000 transfer.

The guided pathway is effectively a free feature that cuts out the need for a middleman, saving a further £200 pm.

As Aviva say of themselves, they operate to the highest standard of governance, something I can totally endorse – I have met their IGC chair twice this year and they take governance seriously.

Aviva’s plan competes with the IFA solution (LV, Royal London etc.) and for those who want a well governed simple solution it has to be on the short-list.

And yet, not one IFA I spoke to has put this plan forward to members of BSPS actively at work at TATA and this gentleman is one of only a handful of members who had considered the Aviva GPP as an investable option.

Despite paying up to 10% of salary into it, TATA do not promote their workplace pension!!

It has come to a pretty pass when a perfectly good, very well funded DC plan has become an embarrassment. But that is what the TATA Steel Personal Retirement Savings Plan is.

The truth is that neither TATA or Aviva were or are prepared to stand up and say that the cash equivalent transfer value taken by the former BSPS member would be well-invested in this plan.

Instead of being an employee benefit, this “PRSP” is hidden away (as in a cupboard). Despite spending hours on its website, I still can find no mention of the plan’s unique feature – its heavily discounted charging structure!

I can only call this a massive failure of nerve.

So long as workplace pensions are this shy, then they will never get a date with the workers they are trying to engage. Might it not be time for Aviva to consider raising its game and having the courage of its convictions?

Or does Aviva secretly agree that it cannot offer – through this heavily discounted product, something that steelworkers need? If so, what is it doing offering this product at all?

Perhaps Aviva should consider moving to a CDC approach and showing a bit of bottle.


If they don’t have confidence in their pensions why should we?

I will be sending this blog to the Chair of Aviva’s IGC committee and asking that these questions be discussed at its next IGC meeting.

I will be doing exactly the same thing to the chair of the IGC committee at L&G (which runs a similarly priced service to the members of the Greybull and Liberty businesses which employ many other BSPS members.

All over Britain , people are taking CETVs and investing them in almost everything but their workplace pensions. I can understand a SIPP as a wealth management tool, but I cannot see why ordinary people should be shoe-horned into SIPPs when they have no pretensions to “self investment”.

Workplace pensions should be the gold-standard – instead they are the “dustbin option” as one steelworker called PRSP.

That can’t be right – something has to change.

tata steel

The plan members forgot.



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

Aussie’s are “Super Pension Savvy” – why aren’t we?


As most people (in pensions) know, Australia has a thriving retirement savings industry that works because there is a social contract between Government, Unions and Employers to fund workers pensions at ever-increasing amounts. I don’t want to do a teach in – if you want to read up – here’s Wiki.

What is most interesting to me about the Australian system is the personal engagement among many Australians in “their Super” – Super being the superlative applied to superannuation funds! In Aus, it is the member -not the employer that gets to choose their “Workie”. Employers use a clearing system where a single feed to the clearer, tags the ultimate destination of the money – the clearer does the rest.

The experience of the past five years tells me that in the UK, the employer has engaged with auto-enrolment but not with the workplace pension. A recent blog remarked that even now, the intent of the Pensions Regulator is to ensure compliance with the processes of auto-enrolment and not engagement with the build up of capital within member’s funds.

While this will be acceptable in the short term, the creation of savings balances within the pension pots will attract the interest of members over time and employers will be called to account for both the choice of workplace pension and its reason for keeping it.

“Workie” the lovechild of benevolent paternalists?

The role of the employer as sponsor , AE administrator , fund selector and fund governor, is a hangover from an earlier time when British employers did run pensions as a fully integrated part of their reward strategy. They contributed to pensions because they wanted to not because “it’s the law”.

The 1m new employers who have “embraced” auto-enrolment have yet to show much enthusiasm for the workplace pensions they sponsor. If they are the offspring of “benevolent paternalism”, then they’re the bastard children.

If we want a properly functioning workplace pension system, then either

  1. employers are going to need to pay more attention to their pension..or
  2. we are going to need to switch to a system of individual choice (and clearing).

The pension dashboard suggests that the Government has given up on the original conception of a personal pension that employees could take from job to job and accepted the principle of one workie/one employer. This would suggest that employers are stuck with “choice and governance” for a good time to come.



Choice and governance

Despite attempts to get informed decision making into the market, the bare stats suggest that for most employers “NEST” was a “good enough” choice- it is and there’s no problem having a NEST-centric auto-enrolment system. We have- apart from NEST, a wide range of alternatives, all of which are “good enough” and some – in certain circumstances – much better than NEST.  That is the sign of a functioning market. Those who want a “NEST fits all” approach beware, there is nothing that will so quickly destroy a success story as a state monopoly.

What has yet to develop in the UK, but flourishes in Australia is a means for people to engage with their own pension. Jo Cumbo has been posting back links from her native land of the websites available in Aus to members. Here’s an example.

While you have to pay to see the information, the comparison process is well laid out and participation in these web pages seems universal (at least by super providers). The shift of money out of workplace pensions into the Australian version of SIPPs continues apace but – since the Cooper report, the value of collective pensions (the original conception of Super) seems to be reasserting itself.

This dynamic between enthusiasm for “going it alone” and the prudence of collective schemes, is healthy. What we can learn from Australia is that if we want people saving more, we have to make the saving sexy. That means putting the emphasis back on returns. This is SuperSavvy’s “return page”.

Right now , Britain is building the infrastructure to properly report on workplace pensions. Yesterday was an important day as we saw the implementation of MIFID II (albeit with rather too many exemptions). Chris Sier’s institutional working group on costs and charges, continues its good work (as does the Transparency Task Force). The IGCs should – without exception – be giving us proper value for money assessments, the Trustee Chairs of our occupational DC schemes are consulting with the DWP on how best to disclose value and money to members.value for money


Full of sound and fury…

But I wonder whether the workplace pension has yet to become part of our financial culture. The British Steel and Tata pensions (run at ultra-low costs by L&G and Aviva respectively, were hardly considered as transfer options in the BSPS “Time to Choose” election.

There was a distinct whiff of condescension from trustees, pension managers and IFAs about these bastard children (my analogy).

The IGCs of both L&G and Aviva need to be asking serious questions about why these excellent products were not promoted to those who were exercising their CETVs.

My suspicion is that neither TATA or Greybull or Liberty wanted to be associated with any pension risk from BSPS and that the insurers were quite happy to fall in line.

While politicians are full of sound and fury about the success of workplace pensions, this will signify nothing – if those workplace pensions are not brought into the mainstream consciousness of those who use them.comparing super

In Australia, websites like Supersavvy, Moneysmart, Australian Super, Superguide, and choice abound and prosper because Australians care about their Super as if it were their house, their car , their family.

Until I see evidence for demand among the British public to know what is going on within the workplace pensions into which they are investing and some interest in comparison, I will not believe that workplace pensions are really working.

Demand or supply?

The British financial services industry is incredibly weedy. All attempts to get comparison into play are met with howls of indignation from IGCs, Trustees and fund managers. League Tables and the like are poo-pooed. Past performance is dismissed, any sense of accountability for outcomes is lost in a hopeless pass the parcel between the various stakeholders at play.

We need a bit more of this!


And if we adopted that attitude elsewhere, we might win a few more cricket matches too!


I’d like to see a little more help from Government for those promoting choice, comparison and good governance in this country.

Wouldn’t you?

Posted in advice gap, Australia, auto-enrolment, cricket, dc pensions, pensions | Tagged , , , , , , | 2 Comments

CDC – the nuclear fission of the pension system.


The way we safeguard our pensions today

This blog looks at the different way people are protected from mischief depending on what type of retirement savings plan they are in. I’m thinking about this because I have various meetings planned in the next month to consider what basis of protection should be given to people who join a CDC pension plan.

Wherever there’s a trust, there’s a risk that trust will be abused. Contract law is designed to minimise the capacity of the unscrupulous to abuse our trust by formalising the relationship between one party and another, which is why most the personal pension is written as a “contract” between provider and individual. With personal pensions, there is a contract not a “Trust”, there are Independence Governance Committees but no Trust Board.

In the past, that there were “trustees” was thought to be enough. But the abuse of trust by Robert Maxwell and his family, who raided the Trinity Mirror Pension Scheme has started a process to ensure that the actions of trustees are monitored and regulated so that similar abuse is not repeated. Lately we have seen the Pensions Regulator enforcing trustees to behave in certain ways and even putting in their chosen trustees from firms like Pi and Dalriada, to make sure good order is returned.

The proliferation of master-trusts that followed the compulsory introduction of UK workplace pensions, lead in the first instance to the creation of the master trust assurance framework and latterly to the provisions in the Pension Schemes Act which now require master trusts to conform to a set of standards enshrined in law. The inexorable direction of travel is towards a rules based regime where trustees do as they are told – much as they would have to – were there a contract between them and their members.

Philosophically, the gap between trust and contract based pensions seems to be narrowing , giving trustees less discretion and regulators more powers. Price caps, reserving, cost disclosure and assurance frameworks are all part of a process that ensures we get what we expect – value for our money.

Why CDC is different, difficult and dangerous!

With the contraction in the scope of trustees to do what they like  (exercise discretion) has come a desire to be told what to do. DB pensions now have to seek the Pensions Regulator’s permission before taking any actions that could impact the security of member’s benefits – this is because the Pensions Regulator has taken on responsibility for ensuring schemes do not fall into the PPF and become a burden on other schemes.

Usually, the process of getting permission (clearance) is a happy one and the right decisions are taken. When things go wrong, it is usually the Pensions Regulator who is now blamed (witness the spats between Lesley Titcomb and Frank Field). All this happens in a culture where benefits are not only “defined” but “guaranteed” – at least to PPF levels, by the whole system of occupational pensions.

But CDC is quite different, it is not about guarantees and the trustees of CDC schemes do not have liabilities, any more than the trustees of DC master trusts have liabilities. All that CDC pension plans have is money which they have a duty to distribute equally (equitably) to members. This is why Friends of CDC talking about it as an “equity driven” rather than “liability driven” pension plan.

This is why some of us want to see CDC regulated as an extended version of the occupational DC plan and not a cut-down version of DB regulations.

Incidentally, we don’t want to have a new code of pensions established as envisaged by the Pensions Scheme Act 2015 – a code called “defined ambition”. Defined Ambition is a nice concept that made it easy for Steve Webb to get people to see CDC (and a range of other ideas) incubated to meet the changing needs of pensioners (post freedoms).

CDC is different because it restores discretion to trustees, does not guarantee but creates a reasonable expectation and because it delivers what is in the pot – over time. This may sound woolly but it’s not. I have worked with products that aimed to distribute 100% of a fund over time and these products were equitable because they recorded the timing and incidence of every individual contribution and paid back people’s contributions with a keen eye to what was fair.

Interestingly, the products I am talking about were overseen by the then insurance regulator (LAUTRO) , there was no equivalent of the PPF or the Pensions Regulator. The demise of these products was because the trust that existed between LAUTRO and the insurers was broken by insurers who repeatedly broke the principles of prudence under which trust had been established. The most heinous example of this breach of trust was the Equitable Life but almost every insurer was guilty of buying the love of their policyholders by over distributing bonuses.

CDC is not only different but it is difficult, because it asks for its operators to be given back the discretionary powers that insurance companies last had in the days of with-profits, but to do so – not as insurers – but as trustees. This is not only difficult, it is highly dangerous – it is like giving someone a lump of uranium.


More “uranium” than “marmite”

I use the simile advisedly. A lump of uranium can- with care – create immense good – producing low-carbon energy that can save the planet. If used badly, then it can pollute (Chernobyl) or destroy (Hiroshima).

CDC cannot do as much damage as uranium but it has an equally wide range of outcomes and could- in the wrong hands- make “Maxwell” and the “Equitable Life” look like a walk in the park. Critics of CDC liken it to the kind of Ponzi Scheme we last saw being operated by Bernie Madoff.

To prevent this happening, we need to have the discussions about how CDC’s discretionary powers are granted before we begin and we have to learn from our past (and to a lesser extent from the pasts of other countries). The historical lessons are mainly negative (they teach us mistakes to be avoided, but they can also be positive, they can inspire us with a prize – an ambition – an aspiration.

Inevitably there will be those who never see the discretionary powers available within CDC as good (again the parallels with nuclear power are helpful). Those people are well known today. Their protest is helpful in ensuring that whatever is built and managed, is managed to the high safety standards expected of a nuclear power station.

Can we do without the power of fusion?

I suspect that technology will bring us advances over the next 50 years that will make our endeavours in 2018 look rather silly. Readers of this blog in 2068 (I flatter myself) may laugh at how puny our ambition was!

But we are where we are in the development of retirement distribution systems that transfer income into savings and back into income.

We have a DC system that transfers income into savings but cannot efficiently return savings to income. We have a DB system that can provide efficient income from savings but at an expense to initial incomes which is untenable.

We need to extend the DC system so that it can distribute savings back to income as efficiently as in DB, but without the strain on income (employer and employee).

We can only progress by pushing at the boundaries of what we know (past experience) and moving forward in hope. I am not sure we will get it right- infact I am sure there will  be setbacks- but you cannot build a progressive pension system without progression!

To use the language of the early part of this blog – we need a contract with the past but we need trust in the future. Creating that balance is what underpins my phrase “restoring confidence in pensions” and it’s what the Friends of CDC is trying to do.

If you can see this as I see it and want to be a Friend of CDC, please drop me a line at Henry.Tapper@pensionplaypen.com and I’ll make the introductions.




Posted in actuaries, advice gap, CDC, defined ambition, pensions | Tagged , , , , , , | 2 Comments

Has the hardest nastiest problem in finance just got a little easier?

nastiest 3

I enjoyed reading this serious and sensible argument by Steven Lowe of “Just”.  I suspect that most financial advisers reading it will conclude, as I do, that planning an income for the final years of someone’s life is so fraught that (if income is needed) it had best be provided by an annuity. This is the conclusion that all the workplace pension providers have come to. Every “guided pathway” on the market leads to the deferred purchase of an annuity – usually at 75.

But Steve’s article makes the point that if you make it to 65, you are likely to live well beyond average life expectancy

While facts in the newspapers may make it tempting for clients to target fixate, the reality is that life expectancy is transitory. A 65 year old man may be expected to live to 84 but those who make it will be expected to live to nearly 92.

Steve is writing to financial advisers whose clients are wealthy enough to have taken themselves out of the common way of financial planning (trust in my pension or hit and hope) and instead employed the services of an expert. Almost by definition, this self-selecting groups of clients will live longer.

What Steve doesn’t say, but has to be said, is that by staying in a pool of people who are likely to live a lot shorter, the wealthy are doing those poorer people in the pool a favour. They are effectively cleansing the pool of much of its longevity risk and taking that risk upon themselves (the hardest nastiest problem in finance).

Has anyone considered the impact of the wealth industry on pensions?

If occupational pensions lose their 10% longest living clients through CETVs to self-managed drawdown, then they are managing a different set of liabilities to those people hanging around and scooping the pool. This is particularly the case with defined benefit schemes which could become in twenty or thirty years time a means of supporting a few very old people (typically the spouses of the men who built up the pensions).

The wealth industry depletes the liability pool, probably faster than it depletes the asset pool, those transferring out of occupational schemes on high incomes carry those schemes biggest liabilities not just because of the size of their pensions, but the duration over which that pension is paid.

A lot is made of the problem of allowing people to select against their pension by taking a transfer value because they anticipate dying quick, not much is made of this opposite- beneficial – situation, where the rich select against themselves.

But we get that the richer we are the less we need income in retirement!

A great capital reservoir is a great thing to a capitalist, he or she can use a drawdown pot to fund all kinds of ventures, from deposits on dependent’s houses to small businesses set up to diminish the tedium of retirement. The agility of liquid capital – what pension freedoms is about – is precisely what an entrepreneur prefers. The rest of us “wage slaves” are about the maintenance of a wage for life which ensures there is bread on the table.

When Merryn Somerset Webb said in the FT that if she had a DB pension she would cash it out, she was saying more about her life aspirations than her financial skills. She is a woman with high self-confidence- Ros Altmann is another (again someone advocating transferring income to wealth last year.

The difficulty with these messages is that while they play well with core FT readers, they can (and are) lifted out of the context of the intended readership and used in advertising by the mass market transfer houses about  which this blog has spoken at length.

While shifting the wealthy out of DB schemes, is probably good news for those schemes, shifting the average Joe (of which I’m one) is not good news to anyone.

Typically people like me underestimate our life-expectancy by 8 years and writing with a new years eve hangover , I feel like living till 60 will be a challenge! But the reality is we do not know. We certainly don’t know about our spouses and even if we thought we knew, we might not now be so sure. Here is the Christmas circular from one of my friends. He doesn’t say he was given no chance of being on the planet past the end of 2015.

Health-wise, it’s all been good, my tumors have had a quiet year with no growth. so my wonder drug is still doing a great job! So well, in fact, that my oncologist only wants to scan and see me 3 times a year, not 4.

We just don’t know!

nastiest 1

Nobody can accurately predict their income needs for thirty years, there are too many variables and that is why increasingly we are looking for the break clauses that might allow us cash out an annuity or take a CETV while a pension in in payment.

My hard-core actuarial chums grind their teeth when I write such heresy but it is a fact of human nature that people are much more likely to enter a building if they know they can get out of it again! The truth is that most of us don’t need EXIT doors and won’t use them, but I would not have been dancing last night in a bar where I didn’t see the bright green light!

What I’ve argued in this article is that by giving people the freedom to leave defined benefit schemes, we allow the wealthy to do what they do best, which is to put capital to best use. By allowing ordinary people like me to have property rights over our pensions, we give us all the EXIT option – albeit one that we are unlikely to take. Auto-enrolment tells us a lot of things – but it shouts loudest that once “in” most people stay “in”.

What does this mean for CDC?

My first “guess” is this. Despite having no empirical data to prove I am right , I suspect that most wealthy people will want nothing to do with CDC – they are wealthy because they like to invest their money as they like.

nastiest 2

Most of us will not be millionaires


My second guess is that the 87% of postal workers who would rather go out on strike than be stuck in a cash balance or DC plan – voted because they wanted a pension – a wage for life.

As Con Keating’s masterful blog yesterday demonstrated, when you stop guaranteeing pensions , you can release sufficient upside from patient capital, to provide better pensions (pound for pound) than any other kind of pension scheme.

CDC has the opportunity to take a vast pool of people with relatively low life expectancy,  and allow the rich to self-select against themselves. By managing the pool on the basis of “equity” not “liability”, the pool can pay more – a function of the duration of investable capital.

Of course CDC could also screw up and become a series of Ponzi Schemes run for the benefits of mendacious actuaries but this seems a very low level risk. Far more likely is that CDC could be the way for the FAMR problem – the great unadvised- to find a solution to the hardest, nastiest problem in finance.

  • global aging
    Could we make them softer?
Posted in actuaries, annuity, CDC, pensions | Tagged , , , , , | Leave a comment

Why we are still angry about Port Talbot.

port tal2

It’s the last day of 2017 and a time to look back at the last three months. The small picture is a series of events that have led to a general awareness that something very wrong was going on in Port Talbot and elsewhere during BSPS’ Time to Choose. Re-reading my and other’s blogs over the period, I realise that we may have missed something which was evident to us (as financial people) but not to members (who may not be).

The following chart is accurate. It shows the impact of “intermediation”; intermediation is the business of the middleman, or in the case of some of the investments we look for the many middlemen.Impact of fees

I know that the title of the table isn’t very catchy, but think of these numbers as how much your money loses because of middlemen and you can see that over a typical 55 year olds life expectancy (30 years) , a low charging fund (my money is invested at 0.25%) will shed 7.2% of its value while a high charging fund (for instance the Vega Algorithm fund you invest into through Active Wealth Management), would lose 58.8%.

If you have transfer your money into my fund (or the TATA workplace pension fund), then expect to lose £36,000 to intermediaries, invest in Vega and expect to lose £294,000.

The choice is yours – or is it?

This wasn’t disclosed

Nobody I spoke to who used “wealth management” such as the Vega Algorithms, had any idea what they were paying or what they were getting for the money. We have looked into both and can confirm that you will be paying at least 3% pa on your investments if you enter Vega using the more expensive share classes (which most appear former BSPS members appear to be in).

Last year the UK stock market made a return of 7.1%, it was considered a good year for investors. But if you are paying 3% pa, then half of your investment return has gone to the middlemen. And this is before we consider the huge impact of the initial fees that would last year have seen your fund go down even though the market went up.

Not only were you not told about the cost of investing into Vega, you weren’t told that you could have invested into the TATA workplace pension , or whatever workplace pension you are now in, at a fraction of the cost. These transfers could get you equivalent deals with self invested personal pensions managed by reputable advisers. There are no shortage of good deals in the market.

This wasn’t explained

In order to make up for the 3% pa taken as business as usual (and the 7%) extra-ordinary costs on the fund when you start out, you need to beat the market.

You can only beat the market by taking risk, but you weren’t taking on the markets, most of you were investing in the “Ultra Conservative Portfolio”.vega cert

Actually , the Vega Algorithms Portfolio you were investing in was buying into other funds which had investment targets that were typically no more than inflation + 3% (6% at the moment). So rather than getting something close to the stock market return, you would have got last year no return at all – in fact a negative return. You could have put your money in the bank and got a better return.

It should have been explained to you that putting your money in the bank is not a good idea, well not for long term investment, but putting your money into Vega is like using a “guaranteed loss account”. Nobody would invest into such a thing, if this was explained to them, the point is, Vega was not explained.

You never had the choice

What makes me and Al and Frank Field and everyone else so flipping angry is that you put your trust in us and we (the advisors) have let you down so completely. Now you know why Al set up Chive and gave up his time. He was so angry that he was prepared to work for nothing to put distance between himself and the rubbish advice being meted out by the sausage and chips merchants.

You – Port Talbot steel men – had no choice and this is not because Celtic and Active were in your face, but because no-one was there to give you another view. I spoke with Ray Adams of Niche,  in November and by then he had already pulled out. It takes one of Ray’s advisers 25 hours – the best part of a week – to properly advise on a transfer – and Ray has only 7 qualified transfer analysts. He had to stop taking on new business to make sure he treated his existing customers fairly.

Somewhere around 15,000 transfers will be requested before the BSPS window is closed in March, nobody- not the Trustees, not the FCA, not the good advisers – recognised the demand to get out. But Celtic and Active and other firms who came down from the north saw their opportunity. You did not have a choice because nobody foresaw what was happening and when it happened, nobody was there to stop it.

Al is working throughout the holiday period helping people who have decided to transfer to get their decision executed. TPAS is doing what it can to provide support to those in limbo after the with drawl of many advisers. There is a mobilisation of resource to help the many people who still don’t know where they will be on March 29th.

We’re not going to let this happen to you.

But the most urgent job is to help people who have transferred already.

If you find yourself in a fund where you are paying 2% or more a year for “intermediation” then you are paying well more than I am. If your adviser can first disclose what you are really paying and explain what you are getting for this cost- and if you are happy with that explanation – then no problem.

But if you hadn’t had this explained, and you can’t see what you are getting for your money, then you should be getting help.

Over the next few months, you will be able to read about the practical steps that the Communication Workers Union are taking for the staff of Royal Mail (ask your postman!). You’ll be able to read about what those who work in universities are negotiating with their employers and I hope you’ll be able to me and my friends (like Al) about what is to be done in Port Talbot and elsewhere.

It is not good enough to point out that a wrong has been done. It is necessary that the wrong is put right. There is indignation throughout the financial services industry at what the press call “the feeding frenzy” that has happened in South Wales and in other parts of the country. But that indignation means nothing if people who have been put in funds like Vega aren’t given the chance to get out on proper terms,

The reason is because experts know the numbers in the table at the top and understand what they mean for your long-term financial futures. Trust me, we are not going to shut up and go home. We will be staying angry for a long time to come.

If you are interested in understanding investment and the reason why charges matter, you might like to take 7 minutes out of your day to watch (or listen) to this video. It clearly explains the message in the table and why it is so hard to ever make investment fees up – once paid.

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

Some commercial considerations for CDC


So who’s going to “sell” CDC?

What an odd question!

I can see the friends of CDC choking over their cornflakes at my asking this question. In the gentile world of policy- it is rarely done to use the “s” word! But for a policy to be successful, it needs take up. There may be a thousand flowers blooming in the garden but they all need water!

CDC is a type of pension scheme for whom it is easier to find buyers than sellers. This unusual state of affairs is because so far, the attention given to it has been from those on the buy-side – politicians, policy makers, consumer groups and those acting as pension fiduciaries. CDC’s promotion has been from actuaries and lawyers, those who are seen as having most to gain by its success, but so far, no-one has really focussed on how CDC schemes might be delivered to the market.

CDC challenges traditional distribution models

If I was (still) an IFA, I would be asking myself, “why would I want to promote a solution that takes diminishes my relationship with my client (effectively outsourcing pension management to the CDC operator)”.

If I was an insurer, I would see CDC as threatening not just my distribution rights but the embedded value of my DC portfolio.

If I was a union, I could see CDC as a further dilution of members right to a guaranteed pension (especially where those rights remain strong – e.g. the public sector).

There is no commercial reason for CDC to be promoted, the benefits of CDC are individual and societal, they are likely to diminish rather than increase the profitability of the “pensions industry.

I do not see CDC being adopted by the existing players other than as a defensive measure.

CDC plays to the new distribution models

The biggest change in pensions distribution over the past fifty years has been auto-enrolment. Not only has it enrolled over 9m new savers into regular retirement saving but it has done so without the assistance of the direct sales forces or retail (rather than corporate) IFAs.

The beneficiaries of this change of distribution have been the master trusts, most obviously NEST, NOW , Peoples and a legion of “upstart crows” most notably Smart.

They have the relationships with small businesses that (by and large) the traditional insurers have failed to reach.

The obvious distributors of CDC pensions will be the master trusts and the most obvious master trust to be involved would be NEST. Despite the DWP knocking back NEST’s request to provide “guided pathways”, I would hope that the opportunity will knock for NEST to provide a CDC section or a new “NEST CDC” scheme.

In time, the workplace pension providers could fill the void between those with super-small pots (that could cash-out with little negative consequence and the larger pots that could be managed with the help of an IFA “wealth” manager).

CDC could de-risk  transfers for DC providers.

While I am sure the sales teams at the large insurers and SIPP providers are enjoying a merry Christmas, the bumper years on 2016 and 2017 have been fuelled by enormous shifts of money out of DB and into their products. The Prudential, Royal London, Zurich , Old Mutual, LV and a host of SIPP providers (Hargreaves Lansdown excluded) have simply held out their platforms and watched the money fall in (like the cook with his apron).

The insurers should have sufficient memory to remember the last time this happened, things ended badly. I see things ending badly again and much of that money will have to go back, unless the outcomes of these platform investments, proves better than what the ceding scheme offered.

CDC may not be as profitable to an IFA or platform manager, or SIPP provider or asset manager, but it looks a whole lot safer – if the phrase “safe harbour” means anything at all.

Of course, just because money has reached a CDC scheme, does not mean the CDC scheme will succeed.

But if the CDC model is fit for purpose, and we intend to prove within reasonable doubt that it is, then all these parties may be prepared to swap mega-bucks with a big risk ticket for more moderate profits with lower risk attached.

In practice, I do see IFAs , faced with clients who have good reason to transfer but insufficient funds to merit their wealth management, offering the transfer advice and operating or recommending CDC.

The role of large employers

My primary focus in writing this article , is to set some hares in travel towards the doors of IFAs , SIPP Providers Master Trusts and Insurers. None of these parties have been included in discussions on CDC, mainly because it has been assumed that CDC will be focussed on large occupational pension schemes looking to move to a new benefit basis for future accrual. Royal Mail has already stated that this is its intention, not just for the members of its DB scheme but also for those in the DC scheme – CDC for 140,000 postal workers.

The implications for other large schemes such as USS, BT and even some of the public sector schemes are obvious.

Large employers are not the sole source of likely flows into CDC but they remain the most obvious and most reliable source. It may well be that the impetus to complete the legislation needed for Royal Mail to set up afresh (and avoid strike action) is CDC.

Royal Mail may beat down the door for other large schemes to follow and these schemes collectively may encourage other schemes to follow. The slow burn of workplace pension accumulation does not require organisations like Peoples Pension and NEST to be in any hurry but the acute problem of pension transfers means a solution for those with small transfers is more pressing.

It is tempting to look at a total rewrite of pension legislation but that temptation should be resisted. In practice I see CDC as an extension of DC and that the many flowers in the defined ambition garden can progress as demand from the market requires.

Demand from the market is currently with the large employers with acute DB problems and those problems include the loss of billions of pounds through CETVs to unknown outcomes.

Building a commercial case for CDC provision is as important as identifying demand.

Building a CDC distribution model around these two fundamental needs should allow the workplace pension providers to follow in at a speed they decide on.

I will be seeing the FCA to discuss all this in the first half of January and would welcome any thoughts from readers. The commercial considerations of CDC are critical to its success and they are the little elephants roaming the room.

Compulsion and incentivisation

What CDC does not need is Government incentivisation. If CDC cannot work within the current tax framework then the commercial model for CDC is at fault. No doubt wealth managers will show that for those with high net worth, CDC is not tax-efficient and there will be all kinds of special reasons why those with smaller DC pots might be advised away from CDC.

But CDC is not a tax- driven product, it is designed for people who want the ease and comfort of a wage for life without the drag and risk of having that wage guaranteed.

The Government’s role in the incentivisation of CDC should be as light touch as possible. Perhaps its most important role would be to make the provision of CDC as difficult as possible to any party looking to make a quick buck. The long-term nature of the enterprise requires the investment of patient capital – both financial and human – in return for consideration that is steady and reliable.

consideration 2

The Government should give consideration to “consideration” as the basis of its enforcement.

Posted in actuaries, advice gap, CDC, pensions | Tagged , , , , , , , | 1 Comment

That’s what Friends (of CDC) are for!

that's what friends are for


It is not pleasant to open your phone to find 25 messages directed towards you and your colleagues trolling your work. So thanks to Alan Higham for what I hope is a message if not of support, at least of sympathy.

The suppression of constructive discussion is an activity that I don’t understand. Why bright people take their keypads on a Christmas evening to be rude to people who in everyday life they’d have a decent conversation with is beyond me.

But it gives me hope that the ideas that we are discussing, not only have intrinsic merit , but that they are getting through to ordinary people. Witness the postman I talked to earlier this week who talked with me about what he understood a “wage for life” to  be and – when I explained CDC to him – immediately told me that that was what he wanted.

In the context of ordinary people’s lives and their aspirations for retirement, CDC is what is wanted

.An apology to Mike Otsuka

Somewhere in the trolling last night, I tried to defend Mike Otsuka for something he did not say. What Mike did say can be read here, it is one of the best things yet written on CDC and anyone interested in restoring confidence in pensions will find it uplifting.

What sparked the trolling was the use of the word “deficit” in a blog about CDC published on my website and written by Con Keating. In this blog, Con points out that there by investing in growth assets or “patient capital”, CDC can actually produce better wages in retirement than both DC and DB, because it need have not adopt the de-risking tactics prevalent in DC and DB approaches. The passage that aroused confusion is this.

It may be in surplus or deficit relative to the equitable interests of its members. If in surplus, the new member has an immediate windfall gain, if in deficit an immediate loss.

The confusion arose because Mark Rowlinson (of my parish) had previously said that CDC could not be in deficit. The objection was that the Friends of CDC were talking against themselves.

With aplomb , Mike Otsuka, who had been wronged  by me – came to my rescue!

Whether words like surplus and deficit are appropriate is another matter – the sense is clear – in an equity rather than liability based scheme, it is “ambition” and not a “promise” that is being targeted.

Sorry to have put you to this trouble Mike! I guess you’d say “that’s what Friends are for”.

Nuts and bolts

Those who seek to antagonise us, argue that we should “by now” have come up with a full blueprint for CDC. This is rather the argument put to political parties who haven’t published a detailed manifesto and I can only put it to our detractors that we cannot specify our version of CDC until we know the parameters within which we can work.

It would be foolish to build models in anticipation of secondary regulation but helpful to do modelling at the behest of regulators , to help them create the parameters. Aon have done work on modelling, more needs to be done. The impetus created by Royal Mail and CWU’s moderated agreement to press for a CDC solution , makes the need for this work pressing. In the new year, the USS and UCU and the University employers will renew discussions about the basis for future pension provision for university staff.

Those who consider our proposals “half-baked” , will have the opportunity to participate in consultations, but unless they have alternatives to those which would have taken the postal workers out on strike, I suggest they hold their breath and cut the Friends of CDC a little slack.

Pro bono

As with the work of Chive in Port Talbot, the actions of Friends of CDC is subject to extreme scepticism from “the experts”.  That a group of people can come together to act as a force for good , offends. That they seek no remuneration offends again. In both its genesis and its ongoing activities, Friends of CDC is clearly offensive to a minority of people.

If we need to point to a precedent, the Transparency Task Force , is probably it. It has done much to promote transparency and created conditions where detailed work can be done and it is a Pro Bono group.

If you want to go after Andy Agethangelou of TTF, or Al Rush of Chive or any of the members of Friends of CDC, you are free to do so. You can troll them as glory-hunters, as disruptors or as amateurs. You would be substantially wrong , but you have the right to your opinion.

But you cannot go after the principle of Pro Bono, – for the public good – for it is inviolable and will persist so long as people believe in the right thing to do.

Here is my message to those that troll others for working for the public good.

Pull down thy vanity

Thou art a beaten dog beneath the hail,
A swollen magpie in a fitful sun,
Half black half white
Nor knowst’ou wing from tail
Pull down thy vanity
                        How mean thy hates
Fostered in falsity,
                        Pull down thy vanity,
Rathe to destroy, niggard in charity,
Pull down thy vanity,
                       I say pull down.
But to have done instead of not doing
                     this is not vanity
To have, with decency, knocked
That a Blunt should open
               To have gathered from the air a live tradition
or from a fine old eye the unconquered flame
This is not vanity.
         Here error is all in the not done,
all in the diffidence that faltered  .  .  .

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Big pension decisions need grounding.


Get back down here!



I am getting worried by the return of the word “systemic”.  It pops up in Andrew Warwick-Thompson’s (otherwise) excellent article “a misunderstood shift” and it’s behind calls from those who know better to “just ban transfers”.

It would be as easy to ban transfers as to make pensions saving compulsory – easy but not right. For when you take away the right of someone to do something, even if it’s as negative as “opting out” you have broken a bond of trust between the state and the individual which is very important to us in Britain.

I would go so far as to say that the right to make mistakes is why we don’t have a written constitution.

Let’s be clear In finance, systemic risk is the risk of collapse of an entire financial system or entire market, as opposed to risk associated with any one individual entity, group or component of a system. What we are seeing in Port Talbot and elsewhere is not systemic, it is local and the result of a special set of circumstances. The ship of state may be leaking but it is not holed beneath the water-line.

Where I take issue with Andrew is not in terms of substance , but of tone. This statement comes from early in his article

Shifting pension risk from firms to individuals may be the only viable option in a low-interest-rate environment. But once the risk is borne by individuals, the danger that poor individual choices will create systemic imbalances could be far greater. People who are poor in retirement are a huge burden that society at large has to bear in some way.

This is more than the statement “the poor is with us”, it implies that poor people take poor decisions. In my experience, poor people don’t take decisions, they have them made for them as they don’t have the money to make free choices.

If you are wealthy, you get access to legal, accounting as well as pensions advice. You can read articles like Andrew’s (published in “Intelligence in European Pensions and Institutional Investment“). These are privileges not granted to most people in this country who have to make do with what they’ve got. I return to the choices that BSPS members told each other they were making.poll bsps

Less than four in a hundred of people were directly exercising freedom and choice, everyone else was delegating. They were putting trust in financial advisers (83%) and  their trustees (13%). That they were choosing advisers over trustees is a marginal decision (to someone who knows nothing about pension governance- they do the same job), what should shock Government is that only 4% of those who answered the snap-poll, felt they had the financial capacity to go their own way. This is hardly surprising, the decision on how to pay yourself a wage for life is “the nastiest, hardest problem in finance”.

This is not what I call systemic, this is behavioural. When faced with choices which are too hard, our behavioural instinct is to put matters in the hand of an available expert, the shift for the steel workers was that they rather trusted an “at-hand” adviser than a remote trustee.

This is a lesson to be learned – we can’t have two worlds!

Frank Field was right when he observed at the W&P Select hearing that the BSPS Trustees and members were in different worlds.two worlds

The problems at Port Talbot and Scunthorpe and Redcar weren’t because someone was buying chicken/sausage and chips, but because the Trustees weren’t. It is a long way from South Wales to Glasgow. Geography matters, the closer to BSPS headquarters, the likelier the bond of trust. There has been no reported transfer trouble at Motherwell, seat of the former Ravens Craig works.

Where pension trustees know and understand their members (and vice and versa) , issues of trust diminish. The vast majority of transfer requests in South Wales happened out of the breakdown of trust.

Member One ;don’t work for Twata anymore the thought of them having their grubby little fingers in the pension was enough to transfer out. I will take my chances .

Member Two; Exactly … my thoughts too I couldn’t wait to get my money away from them

Member Three; We are in this mess because of them greed simple as

Member Four; Finally transferred out of BSPS and gone private. Big relief and happy days

Gone private

Member four went private in a public way, many of the posts on the BSPS Facebook Page are cries of anger and frustration not at the system, but at the particular circumstance that members found themselves in when “choosing”.

Again, to claim that this is a systemic risk and that transfers should be banned, is to misunderstand the decisions that BSPS Trustees made. Looking back , I am sure that they will see that putting resource into the local areas was a higher priority than running remote helplines and websites.

These members went “private” as the “public” confidence had gone and that wasn’t just confidence in “Twata” it was confidence in the BSPS management and trustees.

Public confidence

If we are to keep confidence in collective decision making and collective pension schemes, they need to be relevant to the second decade of the twenty first century. We need to look forward and not back

Restoring public confidence means recreating collective pensions so that they give people the freedoms that they find popular without over burdening people with choice.

The suggestions that are coming from our discussions on CDC are at last addressing these very specific issues. We are asking questions like

  • Should people be able to transfer away from a CDC scheme while it’s paying them a pension?
  • Could people “shape” the kind of CDC pension they receive?
  • Can we explain how smoothing works – when applied to transfers in particular?
  • Is the administrative apparatus up to giving these options?

Good IFAs should be asking similar questions of their clients.  For instance.

  • Would you be able to manage without me?
  • Have you got a succession plan if I’m not around to advise you?
  • How do we deal with matters if our drawdown plan goes wrong?
  • Do you understand what you are paying and what it is for?

I think that those of us who are thinking about CDC , should be thinking about individual drawdown at the same time. We need to ground the arguments for both in the specifics of individual choice and understand the different needs for wealth management and collective pensions.

Systemic arguments – especially arguments about systemic risk- aren’t that helpful!

At this moment, we need to think of how we develop pension policy around freedom and choice , not instead of it.

Banning transfers, or imposing CDC are equally bad things to do. Helping people towards good decisions – as nudge does – is a good thing to do.

Treating people as incapable of making good choices is retrogressive, but giving people options if they can’t or don’t want to take big decisions is progressive.

Trust is everything and trust comes from “being there” rather than in another world.

The lessons of BSPS are critical for our formulation of “big policy” but whatever we formulate, must be grounded in the needs of ordinary people and not based on some vague concept of systemic change or risk!

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Tell us what value is and we’ll measure it!




Donny Hay , a client Director at Pitman’s Trustees, argues cogently in this week’s Pension Expert- about recent work by Chris Sier and colleagues

the cost assessment template focuses on the numbers, but says nothing about whether those costs represent good value for investors. The context is missing; its inclusion is crucial to avoid a race to the bottom, where literal costs dominate over value for members and investment outcomes

I agree that we need to find a proper measure for value, Donny concludes


Asset managers, whether active or passive, will need to fight their corner to demonstrate that those costs represent good value.

Pension schemes will undoubtedly benefit from this unbundling. Clearer disclosure of costs will empower pension scheme trustees to grill their asset managers on all charges and ensure that trading is optimal and in the best interest of their members.

Fund costs will fall as managers absorb more costs, such as broker research, and there is likely to be an increased use of performance fees as active managers seek to recover these costs

I’m not clear why mean reversion applies to manager’s fees (though Thomas Philippon has argued that it does! The FCA claims that the average margin of an asset manager is 36%, it might equally be argued that rather than find knew ways to skin us, the Asset Managers might tighten their belts a couple of notches!

Value – what value!

Fund managers find it a lot easier to claim they add value than to demonstrate it. This is not necessarily their fault. Since we started believing that “past performance is not necessarily a guide to the future” fund managers have become divorced from failures and successes in the past and increasingly rely on brand awareness among customers and intermediaries.

There is another race to the bottom going on here as brand managers look for the bottom of their branding budgets (a thankless task it seems!)

It is all too easy for a fund manager like Newscape to issue a fund prospectus as disastrous as that for the 5Alpha Conservative Fund but to prosper because of a judicious sales and marketing strategy. In terms of brazen carnality , the supplement is the best example of fee-gouging I have ever read, yet it is a perfectly legal document!

If there is an exemplum for what Donny is saying, the fate of the Active Wealth Management pension transfer -bank, is it!

The value of the 5Alpha Fund , the Vega Algorithm DFM or the advice of Active Wealth Management is in its perceived value. We have no measure to judge it by since 5Alpha is new and we cannot judge it by its predecessor (Strand) since that fund no longer exists. The value of Active Wealth Management is in the perception of its clients who were introduced in the main by Celtic Wealth Management. It is arguable whether the value of this introduction derived from sausage and chips or chicken in the basket, though Clive Howells has argued forcibly in his letter to Frank Field MP, that it was sausage and chips.

This “reductio ad absurdam is another race to the bottom. If value can be reduced to silly conversations about marketing inducements, then the value for money debate is lost.

We need a universally accepted framework to understand “value”.

Just as cost needs the context of value, so value needs the context of cost. But we need to be able to measure value and cost independently and we are now – with Chris Sier’s and Mifid and Priips, close to getting full and standardised cost disclosure.

We need the same for value disclosure. For all their hollering for us to consider value, I don’t see much forthcoming over than fund managers claiming to be “value hunters” and advisers comparing nutritional inducements.

The objectives of a fund must be given a value and the fund’s ability to meet those objectives, measured by risk-adjusted fund performance, must be another measure.

If a fund aims to achieve 2% outperformance of a benchmark and does so without taking undue risk, let’s praise it. Providing that is that the benchmark was vigorous enough in the first place!

If a fund takes too much risk to achieve its objective, let’s mark it down for that. If it takes no risk but fails to deliver – let’s mark it down. If the benchmark is akin to stuffing the money under the mattress- let’s mark it down.

Cost is – in the final analysis – only one of a number of risks a member takes, cost effectively raise the bar for value. But cost is easily measurable and comparable. It is one risk that can be taken off the table (to the extent that funds bear unnecessary costs). The risk of paying others too much is one that any sensible person can see is “unrewarded”.

The ball is in the “value-hunter’s” court

While it is right that the Investment Association is given a low place at the costs table, it is also right that they be fully involved in the value debate.

Provided we have nailed cost, then value is a “sunny upland” and I hope that the IA will be getting on with a proposal for us to measure value which can allow us to complete value for money comparisons.

Value hunters should know what value is and they should be able to tell us. Whether it is through the delivery of “alpha” – whatever that is, or “beta”- which I find easier to understand, the fund management industry must tell us what they want the rules to be.

As Donny puts it;

The context is missing; (value’s)  inclusion is crucial to avoid a race to the bottom, where literal costs dominate over value for members and investment outcomes

chris sier


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If you can’t be clever – have clever friends

Having clever friends has been the secret to whatever success I’ve had!

In my third year at college in 1983, a bloke in specs appeared. His name was David Wilson and he came out drinking with us. He was a really good bloke and I’ve often wondered what happened to him.

Last night, my old college, Selwyn College Cambridge, were on the University Challenge up against the sweaty socks of St Andrews. Blow me down but David Wilson was on, now Professor David Wilson . He captained the alumni to a heroic victory and Wilson knocked off 73 of our 145 points! You can watch it here!

David wilson 3

The whole team contributed and I’m pleased to confirm that Sophie (S) Wilson, the person who designed the BBC computer was a chess adversary of Stefan Zait – our BSPS hero!

David Wilson 5


Sophie left with Stefan, the year I arrived. David turned up as a PHD student , being that bit older – and a whole lot cleverer!

Mirum diem

Boxing Day 2017 will be a day of sporting wonder for me for many years to come. Not just were the Alumni doing their thing, but Yeovil Town recorded its first back to back victory since 2014 beating local rivals Cheltenham Town 2-0 away. Add to that news that Moonlight Camp is in preparation for his first race and England caning the Aussies in the Boxing Day test and you can see why yesterday was a “Mirum Diem”.

Selwyn College – no longer the backdoor!

Ok – Selwyn’s the college that no-one has ever heard of and till recently it had a reputation as the back-door to Cambridge. But I’ve got a shed load of Selwyn friends from the early eighties and a good few of them will be reading this blog.

So if you are, and you haven’t been in touch, drop me a line at henry.tapper@pensionplaypen.com

We might have a get together in the Cockpit in Blackfriars and I’ll get Zoe to switch on BBC2 for the next round.

Keep your friends close and your clever friends closest!

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One man’s solution to his problems with “pension freedoms”

David Neilly is a steelworker who has represented Port Talbot members of BSPS at Parliament.

David stef

David Neilly ; centre picture


His words count; we talk of a  pensions “industry” but this is from a man of Ravenscraig and Port Talbot. It is published with David’s permission.


Mr Frank Field Chair of the Pension Freedom and Choice Select Committee.

Season greetings to you Chair and the members of the Pension Freedom and Choice Select Committee, In order to quantify the contribution that the BSPS Members make to the UK economy, I am sending this email to you, from my control room in the steelplant in Port Talbot at 25/12/2017, 7am to 7pm day shift.

As the new Pension Freedom and Choice Act takes its infantile steps the current Defined Benefit Schemes must also work towards the flexibility that can be realized from the Pension Freedom and Choice Act. Why aren’t the Defined Benefit pension schemes more flexible in allowing early or partial access to the member’s funds?

We the BSPS members have now found ourselves in a position where the Financial Services Sector are now actively avoiding our requests to transfers. With FCA reducing the amount of qualified practitioners due to client capacity and or non-compliance issues. We now have to go further a field to find an IFA to facilitate a pension transfers transaction request, which increases the likelihood of compliance breaches by financial practitioners.

In order to give the level of protection to the Defined Benefit Scheme members there is a need for a safe haven so members can exercise their Pension Freedom and Choice options. The creations of a single regulatory body to authorize the Defined Benefit transfer transaction; this would work by an IFA requesting a transfer pack from the centralised source. The Defined Benefit transfer pack would contain all the necessary documentation required to facilitate the transfer protocol.

This Authorized body would be responsible for identification, implementation and execution of the Defined Benefit transfer transaction via the Pension Scheme Trustees. As the intermediary, this would lead to improved processing and transparency and help identify the non-compliant practitioners quicker.

By creating this Authorised regulatory body its prime objective would be to highlight the financial practitioners who do a deliberate act entrapment, manipulate, scam, the Defined Benefit Scheme member, and fund-managers who offer artificial enhancements to the introducers, mitigate the rogue factor.

The financial services have enough control measures in place to reduce the likelihood of a repercussion of the red flag events seen with BSPS transfer. In order to further improve the reaction time within the compliance system could the digitization of the Defined Benefit transfer transaction aid the current measure data analysis for identifiable traits for risk adverse products that warrant action by Financial Conduct Authority?

Many Thanks


David Neilly


david n

A Scotsman in Wales!

Posted in pensions | 4 Comments

Five Christmas Crackers from the Pension PlayPen!

oh no

Merry Christmas readers. I bring you news!



Plan B

Here are five Christmas Crackers to discuss round the tree while you’re waiting for Santa 2.0.

CRACKER ONE – Transfer contracts; FCA to bring in rules surrounding the disclosure of costsFCA 78

  1.  Full disclosure of all transfer costs and cost of ongoing advice to include an estimate of exit penalties from fund management and/or advisory contracts.
  2. Independent sign-off from a second IFA where total cost of transfer exceeds 2% or £2,000.
  3. Banning of all marketing expenses paid from funds to third parties for provision of services (e.g. lead generation). Lead generation costs to be explicitly stated where total cost exceeds 2% or £2000
  4. Transfer analysis and advice certificate to be paid for prior to request for funds and not charged conditional on transfer transaction completing.
  5. Advisers engaging in this business to submit fee model to FCA prior to annual authorisation. Re-authorisation subject to inspection of previous year’s business, cost of PTS to be calculated by FCA to include this extra regulatory burden.

Undoubtedly these measures would decrease the numbers of advisers willing to offer DB transfer advice.  It would reduce the numbers of advisers preying on the vulnerable and focus transfer advice on “special cases” (see CRACKER TWO).

CRACKER TWO – those transferring out of DB must have “special needs”

Where advice is given to transfer, Al Cunningham’s “what makes you special?” test needs to apply. The client needs to explain in their own words (not more than 200), why it is that he/she considers transferring is in their interest.


CRACKER THREE – Guided pathways to include CDCcropped-target-pensions.png

That the FCA and DWP work together on guided pathways for the over fifties who do not have access to good advice and have DC pots (of whatever size).

Guided pathways should include deferred annuity schemes (as proposed by NEST and put in practice by several master trusts)

Guided pathways to include the opportunity for a CDC operator to offer access to a scheme pension at the operator’s discretion , for members wishing to exchange cash for “a wage for life”

CRACKER FOUR – Government to shift from providing to facilitating pension dashboards

That the regulatory costs of the above are met from a redirection of monies away from the Pension Dashboard project. The Pension Dashboard project should be rescaled to the original Treasury conception of Government approved data standards available to commercial organisations looking to improve the visibility and transferability of “loose” DC pots.

CRACKER FIVE –   the new institutional disclosure regulations are extended to retail cover workplace pensions and retail SIPPs.

The artificial division between retail and institutional investor be abolished and all funds, including those offered by SIPPs through DFMs , are subject to the same cost disclosure regulations.

The vertical integration of fund managers and investment advisers offering holistic services to those purchasing investments through retail pension wrappers , is being abused.

Where retail investors want to or are advised to “self-invest”, they should be regarded as having “special needs”, one of which is a heightened understanding of investment costs and charges.

We have protection for intuitional investors , through trust boards, protection for those in contract-based workplace pensions from IGCs, but we have no protection for those investing in Self Invested Personal Pensions. Since these contracts use investments which are supposedly “self-directed” , the onus on disclosure must come from those executing the contracts.

My final recommendation is that the responsibility and cost of reporting on the total cost of investment (including adviser costs) within a SIPP contract, should fall to the SIPP manager. The cost of this reporting should be included (and explicitly quoted) in the wrapper fee.

Five Christmas Crackers – implementable in 2018!

My experience over the last three months leads me to believe that where a small group of like-minded people get together for the common good, they can make change happen.

That is what Al Rush and I started and what others (led by Al) have continued.

There is no point in simply pointing to Port Talbot as an isolated instance of abuse, we know that bad advice, poor implementation and rip-off charges are happening elsewhere. There are systemic problems in the provision of advice on freedoms that include;

  1. The practice of conditional pricing
  2. The under promotion of obvious transfer solutions (workplace pensions +)
  3. The over- promotion of complex products using SIPP wrappers
  4. No proper contracts for those contracting into advisory fees.
  5. Chronic under-resourcing of regulators and legislators to make things better

My five Christmas Crackers give those “in charge” some light-hearted Christmas discussion topics.

Santa is clearly in trouble this year, his presence has been delayed and we should use the intervening period to discuss such pleasant and Christmassy suggestions as are contained in my FIVE CHRISTMAS CRACKERS!

five crackers



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Opting back into a pension scheme?!?

One of the uses of a CDC scheme could be to allow people who have opted out of a DB plan – to opt back into a scheme which pays them a wage for life – albeit one that isn’t guaranteed by an employer or by other schemes. In this blog, I look at the logic for people to do this.

I should point out , that opting into a CDC scheme isn’t possible yet, and even if it was, it wouldn’t be the right thing to do – for many people, but read the blog and then come to your own conclusions as to whether that option might be a comfort.

How can my pension be worth so much?

A lot of members of defined benefit pension schemes seem amazed at the present value of their future pensions.

I am not an actuary and also struggle with “discounting a series of future payments into a cash equivalent transfer value”. I wrote a blog called “why are transfer values are ridiculously  high”, which is one of the best read of the year. Con Keating has added some technical detail.

It’s often said that we underestimate how long we’re going to live (Apparantly by 8 years), it’s not so often said that we underestimate the economic value of the work we do.

If the wage paid to the average British worker (lets say £27,,000) were to be paid over a working lifetime , an actuary might value that string of payments over 40 years at something like the range of transfer values paid today on a pension commencing today to someone on 55.

To put it another way, to pay my son an average wage for life , I would need to invest a sum of around £1m today.

So in terms of their economic value, those steel men I spoke to in their fifties, had already delivered a million pounds of work (in today’s money) and stood to be paid a pension valued at around £350,000 (in today’s money). The shortfall between the transfer value and the cost of two thirds of a million pounds (the full DB promise) is the actuary’s estimate of the real growth in investments that can be expected above wage growth.

If we expect no real investment growth (above wage growth), we might have to pay higher transfer values yet!

The average young person is worth a million pounds in work

If this headline appeared on the front page of the Daily Mail , most Mail readers would cough and splutter through Christmas – aghast.

The average person retiring in their fifties needs a million pounds in their pension

If this headline appeared on the front page of the Daily Express, most Express readers would react similarly to the Mail readers.

But these are the present values of a lifetime’s work and a replacement  “wage for life”.

We start work as millionaires in unpaid wages and we should finish work as millionaires in unpaid pensions.

Would my son want his money up front?

If I were to pay  my son one million pounds and tell him this was instead of a wage to life, I am sure he would be extremely happy with the deal – for a few minutes. But being a smart lad, I think he would ask himself how he was expected to manage that money and what he was supposed to do with his time over the next forty years, he might even ask where he was expected to find the money to pay for the later years of his life!

Infact it would be a terrible deal for my son, if he realised that taking the money now, would deny him the wage for life that he would otherwise get, he’d be bricking himself. Looking back at all the payments I have had to make for my and my family’s expenses, the thought of managing them out of a lump sum paid to me 40 years ago, sends shivers down my spine!

But that is precisely the pact that many of us are making with our pension providers when we take a CETV.

Of course it’s not as simple as all that.

The present value of my state pension , due to be paid to me in just over 10 years time – is probably £250,000, most of the steelworkers I spoke to , knew about this and they also knew they still had economic value from their future work (they might feel knackered at 55 but they had money-making in their bones). Which is why, the CETVs are regarded – to an extent – as windfall money.

But even with the future promise of work and pensions, the enormity of old age and the financial demands of a failing body, had not sunk in (to many of the people I spoke to). Nor would I expect it to. We are not designed as functioning working people to worry about the future in the way that I – a dysfunctional cod-actuary, cod-financial planner, worry about mine!

My father is in his late eighties, so is my mother, they are in the 30th year of receipt of an NHS pension and that pension goes up every year in line with inflation. It meets their financial needs today, just. It does not meet the special needs that might befall them tomorrow – the cost of care. They have been frugal all their lives and they get a state pension and help from the NHS which means they will be alright – especially as they have four sons who can help out.

But… to a pensioner – a pension means so much

But that NHS pension, still going strong after 30 years has supported them for three decades. For them – it is pretty simple, they have been paid a wage for the second half of their life based on the wage from the first half of their life (and without my mother, my father could not have worked as he did).

When I was giving evidence to the Work and Pensions Select Committee , I meant to make three point, the first two were about the transfer process and investments, the third was about ongoing advice and support.

The ongoing support that a pension gives older people is independent of any advice. But the Steel workers I have spoken to are dependent on advice to support them for the next three decades or more. They are relying on an advisory superstructure that may or may not be there for them.

At present, if they want to move from a drawdown from capital to a pension, they will have no choice but an annuity. The option to return to the BSPS2 or PPF will not be open to them.

I , and other Friends of CDC, see the creation of another option- the option to transfer that money back into a pension plan which pays a wage for life (albeit one not guaranteed by employers or other schemes) – a good option.




Posted in advice gap, auto-enrolment, CDC, pensions | Tagged , , , , , , , , , | Leave a comment

Leave DB – we need proper DC



I don’t care if you fall it CDC, target pensions or “proper DC” as I call it in the title. What we need is an opportunity for everyone who has saved in a retirement plan to be paid a wage for life and to my mind that’s what a pension is.

Which is why you can keep your ISAs out of this conversation. The ISA is a decent way of building up a capital reservoir, but it won’t pay you a wage for life and needs to be kept in the shed outside the pension house.

Until now, the only thing that got called a pension was “guaranteed”. The state guarantees your pension (though not when you get it!), employers guarantee your pension (until it gets too tough and they hand over to the PPF and insurance companies guarantee you a pension , if you buy an annuity.

The funny thing is that we work all our lives with no idea if our pay will go up , down or even be there next year, then we get to retirement and we expect the income for the rest of our lives to be guaranteed (and usually to be inflation-proofed too!).

It’s the cost of that guarantee that has done for Defined Benefit pensions and it’s done for annuities too. it hasn’t sunk the state pension because the state can change the basis and timing  of the benefit according to its needs. in this, it has something in common with CDC.

CDC is a way of turning DC into a pension without anything being guaranteed.

CDC is not a dumb-downed version of DB – it is proper DC – DC which pays a pension.

All this is a preamble to the main point of this morning’s blog. It follows a post from a friend of mine who is a Friend of CDC.

I had a long chat today with  one of the civil servants at the DWP who would be drafting any CDC legislation.

He has made the following points:

a) The Pensions Act 2015 was really drafted to allow Defined Ambition and shared risk schemes. Whilst the CDC section was tagged on to it, it wasn’t done as a stand alone section and you couldn’t introduce this bit of the Act without the whole of the defined ambition stuff as well. That means re-writing lots of pensions legislation and he thinks that’s a 2-3 year project with no guarantee of political support

b) An alternative would be to start from current dc legislation and see what needs to be done to is to allow collective accumulation and drawdown. He thinks this could be a much better way of approaching the problem

This may sound arcane stuff , but it’s vitally important to the way we organise pensions in this country.

Royal Mail and the 140,000 people it provides pensions to , have agreed to adopt a CDC approach just as soon as there are sufficient regulations in place for this to happen.

They might have a long wait if the DWP can’t find a way to write the regulations quicker than the 2-3 year project mentioned above. That wait might not be acceptable to Royal Mail or the members and that might mean a return to the strained industrial relations that have dogged 2017. 87% of the members have voted for a wage for life and CDC offers it, cash-balance DB and DC don’t cut the mustard.

But we should not plan this nation’s pension strategy around 140,000 workers – the rules need to work for everyone. Royal Mail is the spur to prick the sides of DWP’s intent. But no more.

People don’t trust DB and don’t understand DC.

The fundamental reason why we need Proper DC – e.g. DC which pays pensions , is clear to see , to anyone who has been following what has been going on in Port Talbot.

The real reason  around 18,000 of the 43,000 eligible steelworkers  have applied for a transfer quote, is that everybody is fed up with the scheme’s sponsor – TATA. If you don’t believe me – read this.  People are increasingly distrustful of their employer’s capacity (let alone intentions) to meet the DB  guarantees and they are taking their money away by the billion. Lloyds Banking Group have seen £3bn leave its scheme in 2017, Barclays are reported to have lost even more, one pension scheme CIO I spoke to last month tells me his colleagues call him “cashpoint”.

This is all very well, were there a decent place for all this money to go. This is not to say that good financial advisers aren’t doing a sterling job managing the SIPP drawdowns for their clients, but a lot of this money is not going into carefully planned retirement decumulation plans but into plans that I fear will not end well. Much of the criticism of what has happened at Port Talbot has been levelled at the advisers. As far as I can see the advisers have used legal SIPPs which invest into legal funds with legal charging structures. All this may seem fine until you do the maths and realise that the only guarantees from these funds is financial ruin.

People who say that DC has been unfairly demonised by government – argue that DC would give as good as DB with the same contribution level. This is tosh – for one thing – DC has a finite horizon – even the NEST guided pathway tips you into an annuity. That means shorter investment horizons , lower investment returns and no either an annuity or no insurance against living too long.

People don’t trust DB and don’t understand DC, the only reason that DC is not a scandal is that we haven’t seen its outcomes (yet).

Proper DC now!

We need proper DC now and it should be the default for anyone who wants a pension from their retirement savings

I’ve been saying this for the eight years I’ve been writing this blog and I’ll be saying the same thing for a good few years to come!

DC is not fit for the purpose of paying ordinary people pensions , DB is no longer trusted. 87% of the 140,000 postal workers were prepared to go out on strike rather for the right for a wage in retirement.

Those steel-workers who I spoke to had little or no idea how their SIPPs would pay them a wage for life and neither have I. The same can be said for most workplace pensions that have no pension strategy other than to signpost those at retirement to financial advisers who have capacity or inclination to help anyone but the “wealthy”.

Proper DC will help Royal Mail and the postal workers, it could help USS, it would certainly help those taking DB transfers and it will be a godsend to those managing workplace pensions.

The DWP seems to have got the message

Cross as I am with the DWP chasing rainbows with their pension dashboard plans, I am still a huge fan of Charlotte Clark and her team. I am confident that those looking at writing the secondary regulations for DC will find a way to quickly and efficiently deliver us Proper DC – CDC – Target Pensions.

Part of that confidence is because of the 50 or so Friends of CDC who are doing everything they can to help!

If you think you are a Friend of CDC – please drop me a line on henry.tapper@pensionplaypen.com and I’ll keep you in the loop.





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Here error is all in the not done, all in the diffidence that faltered . . .


Thanks to the Work & Pensions Committee for giving me a soapbox. Video doesn’t lie and this is what I said, and how I said it. I’m particularly pleased that I was able to share one of the best things I learned at this summers Great Pension Transfer Debate where Al Cunningham spoke.

Some people have called this scaremongering and no doubt Al Rush and I will continue to get criticism from those who support a different way of doing things. However, I put it to you, that if we are to make sense of the FCA’s findings that more than 50% of the advice to transfer is wrong, there must be something that defines what wrong is.

What is wrong with transferring?

There is nothing wrong with transferring if you are know what you are doing. I question whether the comments in this blog, demonstrate that the people transferring know what they are doing, though they might do. Simply kicking out against the sponsor of your pension scheme is not a good reason to transfer and people who give this as their chief reason to take a CETV look extremely vulnerable to being ripped off.

I’d turn things round. To have a good reason to transfer, you must be able to articulate to yourself and to your adviser (assuming you’ve got more than £30k as a CETV) that transferring is in your best interest. The adviser has got to push back if he or she disagrees.

A financial adviser is paid to advise, and as Al Cunningham, Al Rush and all good advisers do, financial advisers have got to be good at saying “no”, even when “yes” makes them more money.

What is wrong with transferring is that defined benefit pension schemes are the best way for most people to get a wage in retirement. It is the exceptions that prove that rule- and there are exceptions.

What is wrong with the world?

A much bigger issue relates to why we cannot be definitive with people and tell them they are wrong. One large pension scheme I deal with knew that a huge amount of CETVs were being taken by one adviser. That adviser turned out to be one of the six that have stopped giving BSPS CETV advice because of the FCA’s current interventions.

But the trustees of this scheme had not shared their intelligence with the FCA and so nothing had been done.

Ezra Pound ends my favourite poem of his

Here error is all in the not done,

all in the diffidence that faltered  .  .  . (Canto LXXXI)
Much of what is wrong with the world is that we do what is easiest to do, not what is right. Which means that bad things happen.
But on a happier note, Ezra Pound also wrote
gloom gold
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Is auto-enrolment to become a stealth-tax on the poor?

stealth tax two



The DWP has released a 200 page  report into the state of the auto-enrolled nation. You can access it here.

I’ve read the executive summary which is full of surprises and the report is clearly informing future strategy.

The executive summary is data heavy and analysis light. It concludes that we are saving more but that our saving is diluted over a wider group so that average pension saving is actually down.

The summary looks at the pinch points of Auto-enrolment, in particular the opt-out patterns but doesn’t contextualise its findings against the needs of households. What is needed is to know whether it is sensible for low-earners to be saving into workplace pensions (as opposed to avoiding debt) and whether the proposed increases in full-pay saving , are really necessary.

If you haven’t seen the proposals for auto-enrolment, have a look at yesterday’s blog.

david robbins

Is auto-enrolment becoming a stealth tax on the poor?

Nudging low-earners into high savings increases their savings ratios much faster than high-earners. With an improving second state pension , it could be that many low-earners are “over-saving” and could be doing better things with their money.

Lurking at the back of this are comments made in a recent review of the solvency of state pensions by the outgoing Government Actuary


GAD quinquennial review of State pension Funding (2014)


I am told that “phasing options” is code for a reduction in state pensions. This is of course the Treasury’s de-risking strategy. High dependency ratios among poor pensioners mean high state support for poor pensioners. Getting pensioners to pay for their own support through private pensions reduces the need for subsidisation from the tax-payer. This is how stealth taxes work.

Why don’t low earners get savings incentives?

Such a cynical view gains credence when one considers the absence of any discussion on tax-relief for those not paying tax. As numerous blogs have shown, a high proportion of those auto-enrolled with earnings in the  £8-12,000 range are contributing to workplace pensions without getting the promised government incentive (equivalent to tax-relief).

These people will see their minimum contributions increase by 500% over the next two years, but they will not see this blow cushioned in any way by the incentives enjoyed by higher earners. How absurd and how unfair. The problem is compounded by low-earners not benefiting from other tax-saving-wheezes such as “salary sacrifice”.

And how do the poorest get paid a pension from all this saving?

At the time that the Government Actuary wrote his report (back in 2014), there was an assumption that all this pension saving would turn into the payment of a wage for life (a pension). The words “Defined Ambition” appear in the excerpt quoted.

GAD was writing when the hope was that this workplace pension saving would result in the payment of pensions resulting from the adoption of CDC and other strategies by workplace pensions. Ironically, this is strategy, that was seen as “at odds” with pension freedoms, was dropped early in the term of office of the ill-starred Cameron government.

Two and a half years later, the calls are once again for a means to turn pension pots into pensions. Royal Mail and its principal union are calling for 140.000 postal workers to save using collective defined contribution, the Work and Pension Select Committee is inquiring into how CDC might yet get the oxygen of proper regulations and the Labour party has adopted CDC as part of its pension proposals.

The answer to the question about how the poorest get pensions from their savings does not get answered by IFAs – who are not their to give financial advice to those with modest savings. It is not answered by the pension freedoms – see how they play out in Port Talbot. The answer to the problems low earners have converting cash to a wage for life lies in CDC.

87% of Royal Mail workers in the CWU voted for a wage for life over a cash balance of DC solution.

I want to see the end of pensioner poverty.

The auto-enrolment proposals being put forward by Government under the disguise of supporting younger people, are in practice a tax on the poor.

  1. They hit poor people’s wages disproportionately hard. (see chart above)
  2. They exacerbate the fiscal injustices of the pension taxation system
  3. They offer Government the moral hazard of reducing state spending on state pensions
  4. They are ignoring the meaningful reforms of workplace savings plans to make them workplace pension plans.

I want to see the end of pensioner poverty, but I don’t want that to be achieved by making ordinary families save so hard that they cannot have a decent standard of living while working.

The proposals put forward by David Gauke this morning are based upon faulty assumptions. I look forward to reading the whole of the DWP analysis and expanding on this theme over coming weeks.

This looks like being a very cold and damp Christmas for the poor and the Government auto-enrolment proposals will do nothing to make it any better.

stealth tax


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“The Ship has sailed” – Con Keating on the Society of Pension Professionals CDC submission

ship has sailed

On Saturday, on Radio 4’s Money Box programme, Hugh Nolan of the Society of Pension Professionals expressed the view that the “ship had sailed” for CDC pensions, and proceeded into the tired and repetitive narrative that it is too late for CDC to resolve the problems of DB pensions. By contrast, Hilary Salt of First Actuarial made the point that CDC is overwhelmingly about correcting the problems with, and improving individual DC.


In light of this exchange, I thought that I should review the Society of Pension Professional’s submission to the parliamentary Work and Pensions Committee’s inquiry into CDC. As that submission is long and consists mainly of the repetition of their response to the 2013 Defined Ambition consultation, I shall limit myself here to their observations, which are new. As with my other submission reviews, the submission text is reproduced verbatim, in black typeface, while my comments are shown in red.




10) Experience in The Netherlands and Denmark shows that collective defined contribution provision  in different forms is feasible and can provide more certainty about income in retirement than conventional defined contribution provision, although the Dutch model is currently facing some serious challenges.

As we have noted in many other articles and notes, we do not consider the Dutch or other overseas models to be appropriate for use in the UK. Indeed, they do provide many examples of what not to do.


11) There is, however, no tradition of risk sharing between pension scheme members in the UK

I am not convinced that this is an unqualified truth. In terms of tradition, we might go back to the friendl