Popcorn Pensions III – transforming the business of Pensions

If you’ve been following my posts recently, (thanks) you’ll be aware of a thread defined by the phrase “Popcorn Pensions” that refers to my friend Peter Shellswell’s KFC moment. Peter told me over the Popcorn Chicken that he’d decided to move on from telling clients what they had to do to working with them to achieve what they wanted to achieve.

You may think this the statement of the bleedin… and to some extent it is. Part of the problem people have when deeply immersed in a profession is to stick their head above the treeline and see the wood above the trees. Even when you are looking about, it’s not easy to recognise that what you thought were sacred trees/cows are just ordinary trees/cows and move off out of the wood to pastures new.

I reckon this is what business leaders do. The people we pay big money to are the people who have the courage to look above the trees, look at what they have been doing with absolute honesty and then challenge the received idea.

For us the received idea was that we were and are managing the wind up of an old order of pensions. This management  process has got a long way to go – a long-tail as the phrase is. Nevertheless, it is a finite process and is not repeatable. The skills required to give defined benefit schemes a decent burial are specific, well defined and boy we have them in spades!

A business that sits happily “in the pocket” (as quarterbacks can) is a business that will ultimately fail. It  has the duration of its customers needs but those needs will change and without transformation, your business will be crushed like the quarterback whose Guards can protect him no longer.

My complaint about the pensions industry is that it loves that pocket. This week we have delighted in the fresh opportunities to beaver away equalising GMPs. Solvency II gives us chargeable hours of happy fun modelling the scenarios for our clients depending on what the EU comes up with next. There are many other business opportunities for pension consultants to explore which will keep them in pay and rations for the immediate.

My complaint is that this work comes at a double cost, the immediate cost is that clients’ money that might have been devoted to deficit reduction, is diverted into Regulatory Compliance with issues which ultimately cannot be resolved to the good of all and will benefit the lawyers/actuaries and investment consultants more than the plumbers/dustman and office workers in the pension schemes they manage. The longer term cost is the opportunity cost. Bright minds are diverted from the fresh pastures where we could be rebuilding the pension infrastructure, inspiring people to plan for their retirement and making sure that when people get to the point they can work no more – that they can enjoy what’s left. We are missing this opportunity and the cost will be felt by generations to come.

Unless , that is, that people like Peter Shellswell, and firms like First Actuarial and departments like the DWP stop, take a look around and work out just how to move forward.

I sense that in the Popcorn Chicken moment,we see the germ of a new type of advice that would initially compliment and ultimately replace our current working  practices. The new consulting is  based on delivering retirement plans. Pleasing participants needs us to work much harder with plan participants to get them to understand what is going on. This is not the same as transferring the risk from company to members. IT’s true that in a DC world, participants will be more exposed to equity returns and gilt yields. We can argue about how much of this exposure can be hedged but that’s not the point. The much more important issue is how we get people to understand how things work and how they can manage their circumstances to do what they want.

Employers are not off the hook with DC, if DC plans fail, they will be left with staff who cannot stop working and will not stop working. They will stink the place out with their grievances that their pensions haven’t worked. They’ll turn off other staff to participating in their plans and we will see the current pension dereliction continue.

Employers are in a position to do something about this. They can get their DC act together, improve their current plans and most importantly, explain what these plans can deliver. They need help to do this and that is where people like me and Peter, firms like First Actuarial and the industry the DWP is attempting to manage can do their stuff.

To do so, we need a few more Popcorn moments leading to a transformed Pension‘s industry. We need to be incredibly positive in our approach and enthusiastic in what we are doing. We cannot achieve a return to the good old days when we believed we had a pensions industry the envy of the world if we don’t believe we can recreate a pension system which is the envy of the world.

I think we can.

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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